The ISM for April came in better than expected. Making up about 70% of the US economy, the services sector grew at a slightly faster pace than last month. The details:
Headline: 51.6 (vs. 50.8 last month) with 11 of 18 industries reporting growth (down from 14 last month)
: grew at a slower pace, with the subindex falling from 55.9 to 53.7 as 10 industries reported growth.
“We are seeing a more conservative approach both domestically and internationally as a result of the current U.S. policies”, and “People rushing to purchase vehicles in advance of the tariffs.”
: grew at a faster pace, with the subindex rising from 50.4 to 52.3. As eight industries reported growth.
“Increased number of companies wanting to increase sourcing and manufacturing in the U.S.” and “Business has slowed dramatically due to new approval process required for all new purchases/acquisitions.”
: declined at a slower pace, with the subindex rising from 46.2 to 49. The 2nd straight month of contraction. As only 8 of 18 industries reported growth.
“Modest gain due to backfilling many empty positions” and “Hiring freeze due to uncertainty of government grants.”
(inflation): increased at a faster pace, with the subindex jumping from 60.9 to 65.1 (the highest reading since Jan 2023). As 17 industries reported paying higher prices. Since rising prices are bad, this subindex is the one you don’t want to see going up.
The services sector grew in April, but its still pretty sluggish growth. The long-term average for the index is 54.8, so a reading of 51.6 (although still expanding) remains well below what the economy could be capable of.
Employment in the and sector declined for the 2nd straight month now. And prices remain way too high.
According to the ISM, “The past relationship between the Services PMI® and the overall economy indicates that the Services PMI® for April (51.6 percent) corresponds to a 1-percentage point increase in real gross domestic product () on an annualized basis.” (emphasis mine)
