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U.S. Service Sector Sees Slower Growth

Economic activity in the non-manufacturing sector grew in April for the 99th consecutive month, say the nation’s…

  • May 31, 2018

Economic activity in the non-manufacturing sector grew in April for the 99th consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM Report on Business. However, the rate of growth has slowed a bit.

In April, the NMI registered 56.8 percent, 2 percentage points lower than the 58.8 percent registered in March, indicating continued growth in the non-manufacturing sector for the 99th consecutive month.

A reading above 50 percent indicates the non-manufacturing sector economy is generally expanding; below 50 percent indicates the non-manufacturing sector is generally contracting.

According to a statement by the ISM’s Anthony Nieves, “The NMI registered 56.8 percent, which is 2 percentage points lower than the March reading of 58.8 percent. This represents continued growth in the non-manufacturing sector at a slower rate.”

He said the Non-Manufacturing Business Activity Index decreased to 59.1 percent, 1.5 percentage points lower than the March reading of 60.6 percent, reflecting growth for the 105th consecutive month, at a slower rate in April.

The New Orders Index registered 60 percent, 0.5 percentage point higher than the reading of 59.5 percent in March.

Crucially, the Employment Index decreased 3 percentage points in April to 53.6 percent from the March reading of 56.6 percent.

Here is a sample of what some of the respondents are saying:

  • “National shortage of Class-A drivers and the increased demand for logistics is resulting in an increase in the cost of goods.” (Accommodation & Food Services)
  • “The trade tensions are impacting purchasing of steel and are causing suppliers to send letters of concern regarding contracted purchases for this year and the future based on these proposed tariffs.” (Construction)
  • “Economy is humming along. [Activity in] both residential and commercial construction [is] apparent. Agriculture sector seems to be moderating at these commodity price levels. The international trade situation appears to be shifting on a minute-by-minute basis, which has folks nervous.” (Finance & Insurance)
  • “Continued shortage of drugs and products manufactured in Puerto Rico.” (Health Care & Social Assistance)
  • “Tax reform windfall continues to help business conditions.” (Management of Companies & Support Services)
  • “Steel tariffs/232 have impacted our steel costs (pipes, fittings, valves, vessels [and the like]).” (Mining)
  • “Some indicators of rising transportation costs, which will eventually affect product prices. Trade tariffs will cause unintended consequences on all industries, affecting production and non-production commodities.” (Professional, Scientific & Technical Services)
  • “Construction activity continues to remain strong in the region, resulting in capacity issues and shortages of labor, materials and subcontractors.” (Public Administration)
  • “Outlook is very promising as we approach a seasonal uptrend in business.” (Wholesale Trade)

Overall, this is a strong report. It does show some headwinds present in the sector brought on by policy changes (steel and aluminum tariffs), but also tailwinds pushing greater growth (tax cuts).

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