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First Cut: ISM Non-Manufacturing Index for April on trend for middling expansion

The ISM Non-Manufacturing Index slipped to 55.5 in April after 56.1 in March. The index appears to be trending for middling growth in the first months of 2019.  The reading came in at the low end of market expectations which may be a bit of a disappointment. However, the service sector has been growing for 111 months in a row and there is no reason to think that it will fail to continue to do so in the foreseeable future.

The index components pointed to stronger business activity (59.5 in April after 57.4 in March), moderate new orders (58.1 after 59.0), modest employment (53.7 after 55.9), and supplier delivery times just above neutral (50.5 after 52.0). Taken together, service sector businesses have managed to weather the slowdown at the end of 2018 and the partial federal government shutdown that impacted businesses in January and into February. If hiring is a bit slower, it is at least in part due to lack of workers with skillsets to match job openings. Delivery times near neutral suggest only that conditions are less busy with goods and services seeing no appreciable delays.

Survey respondents’ comments are by-and-large positive even as they acknowledge the risks to the outlook regarding prices and inventories, and finding qualified workers.

The price paid index narrowed to 55.7 in April from 58.7 in March, rising more slowly in spite of higher costs for gasoline and some food items.

Export orders rose substantially, up to 57.0 in April from 52.5 in the prior month. Imports were also up noticeably at 55.0 after 51.5 in the prior month. Both point to a pick up in activity, with the improvement in export orders of particular importance against the backdrop of concerns for the healthy of the global economy.


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