The ISM's purchasing managers' index rose to 51.6 in April from 50.8 the month prior. The consensus was for a decline to 50.3 in a survey compiled by Bloomberg. The latest report showed that economic activity in the services sector expanded for the 10th straight month, as the reading remained above 50.
The new orders index rose to 52.3 from 50.4, while employment increased to 49 from 46.2. The prices paid index jumped to 65.1 from 60.9, while the business activity index fell to 53.7 from 55.9.
"Regarding tariffs, respondents cited actual pricing impacts as concerns, more so than uncertainty and future pressures," said Steve Miller, chair of the ISM's services business survey committee. "Respondents continue to mention federal agency budget cuts as a drag on business, but overall, results are improving."
Last month, US President Donald Trump announced sweeping new tariffs on imports, including from China, but later declared a 90-day pause on certain duties for non-retaliating countries. Washington and Beijing have been in a deadlock. The Trump administration is "very close to some deals," CNBC reported Monday, citing Treasury Secretary Scott Bessent.
"Tariffs are unlikely to be driving service prices higher outside of specific business sectors that deal with imported raw materials," Jefferies Chief US Economist Thomas Simons said in a Monday note to clients. High readings of the prices paid index suggest "continued strong demand for services and continued difficulty in finding reasonably priced labor."
Separately, S&P Global said its services PMI gauge dropped to 50.8 in April, the lowest reading since November 2023, from 54.4 the month before. The consensus in a Bloomberg survey was for a reading of 51.2. The composite PMI output index dropped to 50.6 from 53.5. Business expectations last month plunged to the lowest level for two-and-a-half years amid trade policy uncertainty, the data provider said.
"While tariff announcements mean manufacturing dominates the news, a worrying backstory is developing in the vastly larger services economy, where business activity and hiring have come closer to stalling in April amid plunging business confidence," S&P Global Market Intelligence Chief Business Economist Chris Williamson said. "The resulting bottom line from the services sector is a heightened risk of stalling growth and rising inflation, or stagflation."
Last week, ISM data showed the US manufacturing sector fell deeper into contraction in April amid weak demand, while S&P Global's survey showed that activity stalled.
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