US service sector activity rises in April

“There was a slight acceleration in the growth rate of the services sector, mainly due to an increase in new orders and continued improvements in supply capacity and logistics,” Anthony Nieves, who conducted the survey, said in the statement.

The PMI remains above the 49.9 level, which according to the ISM indicates growth in the overall economy over time.

But the risks to the economy are mounting. Credit conditions have tightened and Treasury Secretary Janet Yellen warned Monday that the federal government could run out of money within a month, amid a push to raise its $31.4 trillion debt ceiling.

The market expects the Federal Reserve to raise its benchmark interest rate another 25 basis points, to a range between 5.00% and 5.25%, at the end of a two-day policy meeting on Wednesday, before pausing the US central bank’s fastest monetary policy tightening campaign since the 1980s.

The services sector is favored by the displacement of spending on goods, which are normally purchased on credit.

The ISM reported Monday that its measure of the domestic manufacturing sector contracted for the sixth straight month in April, though the pace slowed.

The indicator of new orders received by service companies rose to 56.1 from 52.2 in March. They were likely boosted by a rise in export orders, which shot up to 60.9 from 43.7 in March.

Services inflation remained strong. The input price index paid by service companies rose to 59.6 from 59.5 in March. Service prices tend to be more sticky and less sensitive to interest rate increases.

Some economists consider the ISM index of prices paid for services to be a good indicator of personal consumption expenditure (PCE) inflation. La Fe, which has an inflation target of 2%, follows the PCE price indices for its monetary policy.

Job growth in the services sector continued to slow, falling from 51.3 in March to 50.8, another sign that the labor market is weakening.

The government reported on Tuesday that there were 9.6m job vacancies at the end of March, the lowest level since May 2021. Even so, there were 1.6 vacancies for every jobless person in March, well above the 1.0-1.2 range that economists say it’s consistent with a job market that isn’t generating much inflation.

With information from Reuters and AFP.