U.S. Services Sector Growth Slows in April
Activity across the U.S. services sector continued to expand in April, but at a slower pace compared to the previous month. At the same time, price pressures remained elevated and are expected to increase further as rising energy costs linked to tensions involving Iran begin to filter through the broader economy.
ISM Services PMI Signals Continued Expansion
The non-manufacturing Purchasing Managers’ Index (PMI) from the Institute for Supply Management came in at 53.6 for April, slightly below March’s reading of 54.0 and just under economist expectations of 53.7.
A reading above 50 indicates expansion, and given the services sector represents a large share of the U.S. economy, this metric remains a key indicator of overall economic health.
Middle East Tensions Weigh on Business Sentiment
Survey responses highlighted growing concerns tied to the ongoing conflict in the Middle East. While many sectors reported limited direct operational impact so far, uncertainty remains high.
Industries such as healthcare and social assistance pointed to geopolitical risks as a key near-term concern. Meanwhile, respondents in public administration and professional services indicated a cautious approach as they assess potential economic fallout.
New Orders Decline While Price Pressures Persist
A key component of the report, the new orders index, dropped sharply to 53.5 from 60.6 in March, signaling a slowdown in demand.
At the same time, the prices paid index held steady at 70.7—below expectations of 73.7—but still elevated, suggesting ongoing inflationary pressures.
Analysts at Vital Knowledge described the data as slightly negative overall, citing the combination of weakening demand and persistent inflation.
Oil Price Shock Raises Inflation Concerns
A surge in oil prices following disruptions in the Strait of Hormuz has intensified fears of renewed inflation in the U.S. and globally. The route is critical, handling a significant portion of global crude shipments.
Although some businesses have not yet seen direct cost increases, expectations are that higher energy prices will gradually impact supply chains and operating expenses.
According to ISM Services Committee Chair Steve Miller, elevated price readings are likely to persist for several months, regardless of how the geopolitical situation evolves.
U.S. Job Openings Edge Lower
Separately, labor market data showed a slight decline in job openings. The Job Openings and Labor Turnover Survey (JOLTS) from the Bureau of Labor Statistics reported 6.866 million open positions in March, down from 6.922 million previously and close to forecasts of 6.860 million.
Hiring activity increased, with 655,000 additional hires bringing the total to 5.554 million. The hiring rate rose to 3.5% from 3.1% in February. However, layoffs and discharges also edged higher, reaching 1.2%.
Focus Turns to Upcoming Labor Data
Markets are now awaiting further labor market indicators, including the closely watched non-farm payrolls report for April. These upcoming figures are expected to provide deeper insight into the resilience of the U.S. labor market amid rising inflation risks and geopolitical uncertainty.
Inflation trends and employment data remain critical for the Federal Reserve, as policymakers balance efforts to control price pressures while supporting economic growth and full employment.
