MNI INTERVIEW: US Services Shrink First Time Since 2022 - ISM

U.S. services shrank in April for the first time since 2022 but the sector should continue to grow on average over the remainder of this year, Institute for Supply Management services chair Anthony Nieves told MNI Friday.

The ISM services index decreased 2 percentage points to 49.4 in April, below expectations and the third straight decline. Ending a period of 15 months of growth, the underlying composition was weak. The business activity component fell 6.5 percentage points to its lowest level since May 2020, employment declined 2.6 percentage points and new orders fell.

"I'm not really getting to that high concern level," Nieves said. Respondents "believe business will pick up in the next few months," he said.

"We had this back in December of 2022 after strong months of growth and we were all concerned that here we are finishing up that last month of the year with contraction and it bounced back," he said, predicting the PMI will average in the low 50s this year.

HIGH PRICES

The prices paid measure increased by 5.8 percentage points to 59.2, the highest since January.

Respondents indicated inflation is a concern, Nieves said, but he emphasized prices have been growing for 83 consecutive months and are well-below earlier rates that reached into the 80s. (See: MNI INTERVIEW: Fed Set To Start Easing By Year End-Haslag)

The April reading is the 22nd in a row near or below 70 percent, following 10 straight months of figures near or above 80 percent from September 2021 to June 2022. In April, there were 15 commodities reported up in price, 1 reported down in price, and 6 reported in short supply.

The employment gauge slid to 45.9, the second-lowest reading since 2020, but respondents noted difficulties finding workers to backfill positions and controlling labor expenses. "There are indications that they're looking to start hiring," he said.