The Institute
for Supply Management (ISM) announced on Friday that its Services PMI came in
at 49.4 per cent in April, recording a decrease of 2.0 percentage points from an unrevised March reading of 51.4 per
cent. The latest figure
indicated that the U.S. services sector shrank for the first time since December 2022,
ending a period of 15 straight months of expansion.
Economists had predicted
the indicator to increase to 52.0 in April.
A reading above
50 signals expansion, while a reading below 50 indicates contraction.
According to
the report, the Production index plunged by 6.5 percentage points 50.9 to 50.9 per cent in April, indicating growth in output
for the 47th month in a row, albeit at a weaker pace than in recent months. In
addition, the New Orders gauge dropped by 2.2 percentage points to 52.2 per
cent, indicating expansion for the 16th consecutive month but at a slower rate.
The Employment measure decreased by 2.6 percentage points to 45.9 per cent,
indicating employment activity in the services sector contracted in April for
the third straight month. Meanwhile, the Inventories indicator surged by 8.1
percentage points to 53.7 per cent, indicating inventories returned to growth
after four successive months of shrinkage. The Supplier Deliveries indicator jumped by 3.1
percentage points to 48.5 per cent, indicating faster performance for the third
consecutive month. The Backlog of Orders index climbed 6.3 percentage points
to 51.1 per cent, indicating a rise in order backlogs in April after a
one-month contraction. On the price front, the Prices index soared by 5.8
percentage points to 59.2 per cent, indicating that prices paid by services organizations for
materials and services increased in April for the 83rd month running.
Commenting on
the data, the Chair of the ISM Services Business Survey Committee, Anthony
Nieves, said that the April fall in the composite index was a result of lower
business activity, slower new orders growth, faster supplier deliveries and the
continued contraction in employment. “Survey respondents indicated that overall
business is generally slowing, with rates varying by company and industry,” he noted.
“Employment challenges continue to be primarily due to difficulties in
backfilling positions and/or controlling labour expenses,” Nieves added. Also,
he unveiled that most respondents indicated that inflation and
geopolitical issues remain concerns.