The U.S. services sector picked up speed in April, according to the Institute for Supply Management, with growth broadening across key components of the economy’s largest segment.
The Services PMI rose to 51.6 percent last month, up from 50.8 percent in March and beating expectations for a modest dip. The increase marks a reversal from the prior month’s slowdown and suggests the sector may be reaccelerating heading into the second quarter.
Three of the four major subindexes that feed directly into the headline PMI improved in April, with increases in new orders, supplier deliveries, and employment. Only the business activity index edged slightly lower, though it remained well in expansion territory at 57.2 percent.
“April’s change in indexes was a reversal of March’s direction,” said Anthony Nieves, Chair of the ISM Services Business Survey Committee. “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. Overall, results are improving.”
The new orders index rose to 52.3 percent, up nearly two points from March, pointing to firming demand after a period of hesitation. Supplier deliveries also slowed slightly—typically a sign of increased business activity. Meanwhile, the employment index, though still in contraction, moved up to 49.0 percent, suggesting that firms may be regaining confidence about future hiring needs.
Prices paid for inputs did rise sharply to 65.1 percent, the highest since January 2023, reflecting increased cost pressures. But ISM emphasized that respondents were more concerned with actual price changes than speculative future impacts—particularly related to tariffs. “Respondents cited actual pricing impacts as concerns, more so than uncertainty and future pressures,” Nieves said, downplaying broader alarm over recent trade actions.
Eleven of the 17 industries tracked reported growth in April, led by accommodation and food services, retail, and wholesale trade. Industries tied to federal spending, including public administration and education, continued to cite agency budget cuts as a drag on growth.
The April report contrasts with a softer reading from S&P Global, whose services PMI fell to 50.8 percent, the lowest since November. But ISM’s data, focused more on larger firms and supply chain dynamics, offered a more encouraging picture of demand stabilization and improving business conditions.
“The services sector continues to expand, and the breadth of improvement across core subindexes is a welcome sign,” said Nieves.
While inflation pressures remain elevated, markets responded positively to the stronger-than-expected reading. The yield on the 10-year Treasury note rose modestly, while equity futures held steady, reflecting confidence that the Fed is unlikely to shift policy prematurely in response to tariff-related pricing shifts.
With growth firming and hiring conditions stabilizing, the ISM report suggests the service side of the U.S. economy is holding up well under evolving policy conditions—and may be poised for stronger gains ahead.
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