After the release of the April Non-Manufacturing ISM® Report On Business® on Thursday, many of the headlines highlighted a clear trend — the NMI® dropped for the third straight month. That was due mostly to declines in two of the four indexes that factor into the composite index.
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Two of the four equally-weighted indexes that make up the NMI®, Employment and Supplier Deliveries, were down, indicating slower growth. (Business Activity and New Orders are the other two indexes.) However, there was a lot to like among the rest of the data.
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Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management® (ISM®) Non-Manufacturing Business Survey Committee, spoke with Manufacturing Talk Radio on Thursday, saying that while growth in the U.S. services sector is slowing, it remains solid.
“Keep in mind that the baseline moves each month, and we're still having a strong rate of growth,” Nieves said. “Even though the composite is down (in April), if you look at the 12-month average, which is 57.6, it's (not far off) and still stronger than what was reported at the end of the year, in December (56.0).”
The Trump administration’s tariffs and global trade turbulence dominated the discussion following the release of the Manufacturing ISM® Report On Business® for March and April. The chatter has been less intense in relation to the NMI®; however, those issues are of vital importance to the non-manufacturing sector, Nieves told Manufacturing Talk Radio, particularly regarding the cost of goods.
Tariffs is among the subjects in the Spring 2018 Semiannual Economic Forecast, in which purchasing and supply executives on ISM’s Manufacturing and Non-Manufacturing Business Survey Committees provide performance projections for their sectors and the U.S. economy for the rest of the year. The Semiannual Economic Forecast will be released at 10 a.m. EDT on Monday, and it will be the focus of a session at the ISM2018 Annual Conference in Nashville, Tennessee.
The Report On Business® roundup:
Bloomberg: U.S. Service Industries Cooled in April as Hiring Gauge Fell. "Even with the drop in the main index, orders and growth remain solid for service industries, which account for about 90 percent of the economy, and a tax-driven boost to consumers’ and companies’ coffers is expected to underpin demand. Meanwhile, businesses may be having difficulty finding qualified workers, and tariffs on imported metals are hitting a variety of firms."
Financial Times: U.S. Services Sector Growth Slows Again in April — ISM Survey. "While the figure missed expectations for a smaller slowdown to 58.1, it remains comfortably above the 50 mark that separates expansion from contraction. The services sector, which includes professional services, health care and other non-manufacturing industries, makes up about 80 per cent of U.S. gross domestic product. The ISM data come ahead of Friday’s all-important jobs report and provides Federal Reserve officials with another piece of data to chew over as they deliberate on the pace of interest rate hikes this year."
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MarketWatch: ISM Non-Manufacturing Index Slows to 4-Month Low in April. "Respondents started talking about rising labor and product costs, even as they said the economy is still rolling along. The prices component edged up 0.3 points to 61.8 percent. ... Employment and supplier delivery components fell. The U.S. economy is still in good shape — perhaps too good, as the concern over rising prices demonstrate. That’s why the Federal Reserve signaled Wednesday it was likely to keep lifting interest rates this year. ISM said the April reading corresponds to a 2.9-percent increase in real gross domestic product on an annualized basis."
The Wall Street Journal: U.S. Non-Manufacturing Pace Slowed in April. "Economists surveyed by The Wall Street Journal had expected an April reading of 58.2. ... 'Trade war concerns appear to be weighing on sentiment, although levels are still fairly high,' Jim O’Sullivan, an economist at High Frequency Economics, said in a note to clients. While (ISM Business Survey Committee) respondents remained positive about business conditions and the economy overall, they 'expressed concern regarding the uncertainty about tariffs and the effect on the cost of goods,' according to the report."
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