The April U.S. Services Purchasing Managers' Index (PMI) from S&P Global rose 1.2 points to 51.0, indicating marginal improvement in the services sector. The latest reading was lower than the forecast of 51.3.
From the latest press release, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said:
“Although business activity returned to growth after a small decline in March, it’s clear the pace of growth has kicked down a couple of gears since the start of the year. The survey data are indicative of GDP growing at a modest 1% annualized rate.
“Growth may weaken further, as service providers are reporting lower inflows of new business for the first time in two years, reflecting an intensifying hit to demand from the war in the Middle East.
“The direct impact of the war has been most evident in consumer-facing services, as high prices have led to a pull-back in discretionary spending on activities such as holidays and recreation, though transport has also been curbed by high fuel prices and travel disruptions.
“However, a secondary additional driver of renewed weakness is a drop in demand for financial services, in part linked to heightened uncertainty about market outlooks but also reflecting expectations of higher inflation and interest rates, which has hit real estate and lending activity.
“A further increase in input cost inflation reflected not just higher fuel prices but a widening spread of goods and services rising in price, as well as higher wages, which will feed through to consumer price inflation in the coming months. The scale of the price rises will put pressure on the Fed to prevent higher inflation becoming entrenched.”
Background on the S&P Global US Services PMI
The S&P Global US Services PMI™ measures the activity level of purchasing mangers in the services sector through a questionnaire of ~400 service sector companies. The sectors covered include consumer (excluding retail), transportation, information, communication, finance, insurance, real estate, and business services. The S&P Services PMI is a diffusion index, meaning that a reading above 50 indicates expansion in the sector compared to the previous month and a reading below 50 indicates contraction.
Here is a snapshot of the series since mid-2012.
