Services sector expands for 10th consecutive month in April
Economic activity in the services sector expanded for the 10th consecutive month in April, say the nation’s purchasing and supply executives in the latest Services ISM Report On Business.
The Services PMI registered 51.6%, indicating expansion for the 56th time in 59 months since recovery from the coronavirus pandemic-induced recession began in June 2020.
The report was issued today by Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management (ISM) Services Business Survey Committee: “In April, the Services PMI registered 51.6%, 0.8 percentage point higher than the March figure of 50.8%. The Business Activity Index registered 53.7% in April, 2.2 percentage points lower than the 55.9% recorded in March. 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 ISM® Report On Business® index that is inversed; a reading of above 50% indicates 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%. 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.
“Eleven industries reported growth in April, a drop of three from the 14 industries reported in January and February. The Services PMI has expanded in 55 of the last 58 months dating back to June 2020. The April reading of 51.6% is 1 percentage point below the 12-month average reading of 52.6%.”
Miller continues, “April’s change in indexes was 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.”
INDUSTRY PERFORMANCE
The 11 services industries reporting growth in April — listed in order — are: Accommodation & Food Services; Wholesale Trade; Mining; Real Estate, Rental & Leasing; Retail Trade; Arts, Entertainment & Recreation; Health Care & Social Assistance; Transportation & Warehousing; Information; Educational Services; and Utilities. The six industries reporting a contraction in the month of April — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Professional, Scientific & Technical Services; Finance & Insurance; Management of Companies & Support Services; Public Administration; and Construction.
WHAT RESPONDENTS ARE SAYING
• “Sales and traffic have improved on track with year-over-year seasonal trends. We seem to be outperforming some of the publicly traded restaurants reporting results.” [Accommodation & Food Services]
• “Tariffs are negatively impacting small business customers. Many small business customers source their products from China. They cannot afford to compete in the marketplace sourcing from other countries. We could not move products fast enough to beat the tariff starting dates.” [Agriculture, Forestry, Fishing & Hunting]
• “Business is steady.” [Construction]
• “There is great concern at my institution (medical school with a research institute and hospital) that changes from the current administration will severely and adversely affect many of the populations we are trying to help live healthier lives.” [Educational Services]
• “We are actively reviewing the impact of tariffs. We are seeing some vendors increasing their prices, and we are actively pushing back on those increases. We expect our vendors to honor our contracted pricing.” [Health Care & Social Assistance]
• “Generally, pricing is lower, but there is some uncertainty of actual, final costs due to tariffs.” [Other Services]
• “Our business is in a state of crises with uncertainty caused by both the ongoing trade war and the threats to federal funding of programs.” [Public Administration]
• “Uncertainty remains the dominating theme as the U.S. government has been maddeningly inconsistent with tariff implementation.” [Real Estate, Rental & Leasing]
• “Tariffs and concerns about government grants still impacting our procurement operations. Some projects are slowing or being held off to ensure we have funds to complete the current work.” [Transportation & Warehousing]
• “The tariff uncertainty is causing a lot of consumption of human capital. We are starting to see some tariff charges, some are significant given the price of the highly specialized units that were ordered over two years ago. Based on our spend over the last couple of years, we will have to adjust our capital and operations and maintenance plans.” [Utilities]
INDUSTRIAL SUPPLY MAGAZINE
The May/June issue of Industrial Supply magazine features an in-depth cover story about the ISA's Veterans Empowerment Network. Plus, we're featuring articles by contributing writers Dr. Bharani Nagarathnam and Frank Hurtte, as well as interviews with numerous product and distribution industry experts.
