Economic activity in the services sector increased for the 10th consecutive month in April, with retail among those industries gaining, according to purchasing and supply executives in the United States as polled in the latest Services ISM Report On Business.
In contrast, manufacturing pulled back.
The Services Purchasing Managers Index registered 51.6% in April, with a plus 50 figure indicating expansion for the 56th time in 59 months since recovery from the coronavirus pandemic-induced recession began in June 2020.
Steve Miller, chair of the Institute for Supply Management Services Business Survey Committee, pointed out that the April Services PMI was 0.8 percentage point higher than the March figure of 50.8%, although activity in various subindexes varied.
“The Business Activity Index registered 53.7% in April, 2.2 percentage points lower than the 55.9% recorded in March,” he said. “This is the index’s 59th consecutive month of expansion. The New Orders Index recorded a reading of 52.3% in April, 1.9 percentage points higher than the March figure of 50.4%. The Employment Index stayed in contraction territory for the second month in a row. The reading of 49% is a 2.8-percentage-point increase compared to the 46.2% recorded in March. The Supplier Deliveries Index registered 51.3%, 0.7 percentage point higher than the 50.6% recorded in March. This is the fifth consecutive month that the index has been in expansion territory, indicating slower supplier delivery performance.”
Supplier Deliveries is the only index that is inversed, with a reading of above 50% indicating slower deliveries, which is typical as the economy improves and customer demand increases.
“The Prices Index registered 65.1% in April, a 4.2-percentage point increase from March’s reading of 60.9% and a fifth consecutive reading above 60%,” Miller indicated. “The Inventories Index registered its third consecutive month in expansion territory in April, registering 53.4%, an increase of 3.1 percentage points from March’s figure of 50.3%. The Inventory Sentiment Index expanded for the 24th consecutive month, registering 56.1%, down 0.5 percentage point from March’s reading of 56.6%. The Backlog of Orders Index registered 48% in April, a 0.6-percentage point increase from the March figure of 47.4%, indicating contraction for the eighth time in the last nine months.”
April index changes represented, as Miller pointed out, “a reversal of March’s direction, with increases in three – New Orders, Employment and Supplier Deliveries – of the four subindexes that directly factor into the Services PMI. Of those four, only the Business Activity Index had a lower reading compared to March. Employment continues to be the only one of these subindexes in contraction territory, with two straight months of contraction. From December through February, all four subindexes were in expansion. Regarding tariffs, respondents cited actual pricing impacts as concerns, more so than uncertainty and future pressures. Respondents continue to mention federal agency budget cuts as a drag on business, but overall, results are improving.”
As stated in the report, 11 services industries grew in April: Accommodation and Food Services; Wholesale Trade; Mining; Real Estate, Rental and Leasing; Retail Trade; Arts, Entertainment and Recreation; Health Care and Social Assistance; Transportation and Warehousing; Information; Educational Services, and Utilities. At the same time, six industries contracted in April: Agriculture, Forestry, Fishing and Hunting; Professional, Scientific and Technical Services; Finance and Insurance; Management of Companies and Support Services; Public Administration, and Construction.
Economic activity in the manufacturing sector contracted in April for the second month in a row, following a two-month expansion that came after 26 straight months of contraction, as noted in the Manufacturing ISM Report On Business. The Manufacturing PMI registered 48.7% in April, 0.3 percentage point lower than the 49% recorded in March. Based on the Manufacturing PMI, the overall economy continued to expand for the 60th month after one month of contraction in April 2020. A Manufacturing PMI above 42.3%, over a period of time, indicates economic expansion.
As with the Services PMI, 11 industries in the manufacturing sector grew in April: Apparel, Leather and Allied Products; Petroleum and Coal Products; Plastics and Rubber Products; Electrical Equipment, Appliances and Components; Textile Mills; Computer and Electronic Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Machinery; Chemical Products, and Primary Metals. Then, six manufacturing industries contracted in April: Wood Products; Furniture and Related Products; Paper Products; Food, Beverage & Tobacco Products; Transportation Equipment, and Fabricated Metal Products.
