U.S. Services Sector Activity Grew Solidly in April — ISM

Service providers in the U.S. reported robust growth in business activity in April due to the easing of virus-related restrictions, reduced health risks and a wave of spending triggered by strong fiscal support to households.

The ISM Services Report on Business PMI decreased to 62.7 in April from an all-time high of 63.7 in March, data from a survey compiled by the Institute for Supply Management showed Wednesday.

Economists polled by The Wall Street Journal expected the PMI to come in at 64.1, well above the 50 point break-even point that separates expansion over contraction.

“There was slowing growth in the services sector in April; however, the rate of expansion is still strong,” said Anthony Nieves, chair of the ISM Services Business Survey Committee.

The service sector activity should continue to ramp up in the months ahead as Covid-19 ebbs and fiscal support allow consumers to spend on services that were restricted during the pandemic, economists say.

In April, the ISM services business activity index fell to 62.7 from 69.4 the previous month, while the new orders index eased to 63.2 from 67.2 in March. “Respondents’ comments indicate that pent-up demand is continuing,” Mr. Nieves said.

The employment index increased slightly to 58.8 from 57.2, the data showed.

Many service providers also reported to be tied down by supply-side constraints. The supplier deliveries index increased further to 66.1 from 61.0 the previous month, and the prices index edged up to 76.8 from 74.0.

“Production-capacity constraints, material shortages, weather and challenges in logistics and human resources continue to affect deliveries, which has resulted in a reduction of inventories,” Mr. Nieves said.

“Business is very robust, but logistics and supply cannot keep up,” one of the respondents from the wholesale trade sector said.

The ISM services PMI also signaled that the U.S. overall economic activity continued to grow in April, as a reading above 48.5 over time generally indicates an expansion of the overall economy. This is the eleventh straight month in which the PMI indicates such expansion.
Source: Dow Jones