U.S. Services Gauge Falls to Lowest Since 2017
(Bloomberg) -- A gauge of U.S. service industries unexpectedly dropped for a second month, slipping to the lowest level since August 2017 in the latest sign of weaker economic momentum at the start of the second quarter.
The non-manufacturing index declined to 55.5 in April from 56.1, according to an Institute for Supply Management survey released Friday that continued to signal expansion. Three of four components fell, with employment reaching a two-year low as new orders also weakened.
- While the index has declined from a 13-year high in September, it remains comfortably above 50, the dividing line between expansion and contraction. That suggests the economy continues to grow, though at a slower pace than last year.
- The weakness in employment contrasts with Friday’s U.S. jobs report, which showed payrolls climbed in April by a robust 263,000 that topped all projections. Other data this week showed filings for jobless benefits held at a two-month high.
- The ISM said Wednesday its factory gauge fell in April to a two-year low of 52.8 as measures of new orders, employment and production all dropped. Federal Reserve Chairman Jerome Powell said that reading signals “moderate or perhaps modest growth” in manufacturing.
- While the factory survey showed exports and imports contracting, those components of the services report both improved, with the imports gauge at a seven-month high despite continuing tensions with major trading partners.
“We’ve become accustomed to this non-manufacturing sector having such steam for a period of time,” Anthony Nieves, chair of the non-manufacturing survey, told reporters on a call Friday. “We’ll see how this trends out in the next few months but overall, still looks pretty good.”
- The gauge of business activity climbed to 59.5, posting the lone gain among the four main index components.
- The prices index fell to 55.7.
- A gauge of supplier deliveries fell to 50.5, the lowest since August 2017, indicating bottlenecks are easing. Readings above 50 show slower deliveries, while those below that level indicate faster. The backlogs index decreased.
- Fifteen of 18 non-manufacturing industries reported growth in April.
- Economists in Bloomberg’s survey had forecast that the main services index would rise to 57.
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