United States: Services sector business activity growth softens
The S&P Global U.S. Services Purchasing Managers’ Index (PMI) fell to 51.3 in April from 51.7 in March. As a result, the index remained above the 50.0 no-change threshold, but signaled a softer improvement in services sector business activity compared to the previous month.
There was a reduction in new orders for the first time in six months, often attributed to clients’ reluctance to spend or commit to new projects, sometimes due to high interest rates. Additionally, new business from abroad decreased, while employment fell for the first time in nearly four years.
Both input costs and output price inflation softened at the beginning of the second quarter, but remained above the pre-pandemic average. This was driven by rises in wages and higher oil and gas prices. U.S. service providers remained optimistic about future business activity growth, influenced by hopes for lower interest rates and expectations of improved demand conditions following the presidential election.
On the GDP implications, Chris Williamson, chief business economist at S&P Global Market Intelligence, said:
“Alongside a concomitant cooling in the rate of growth of manufacturing output, the weaker service sector performance means overall business activity grew in April at the slowest rate seen so far this year. At current levels, the PMI indicates that GDP is expanding at a modest annualized rate of approximately 1.5% so far in the second quarter.”