The U.S. ISM services PMI unexpectedly climbed 0.7 points to 51.9 in April, holding firmly in expansionary terrain. That was better than expected and halted two straight months of decline.
Regional Fed surveys hinted at slowing business activity, which fell 3.4 points to 52.0. But, the surprise was the big jump in new orders, up 3.9 points to 56.1, suggesting services demand remains resilient.
On the inflation front, the prices paid sub-index inched up to 59.6—not what the Fed wants to see as it battles against stubbornly high services inflation. Meanwhile, the ISM manufacturing survey, out earlier this week, reported prices paid also climbed, suggesting factory-gate costs may show some vigour.
The ISM services PMI surprisingly rose in April. New orders remained exceptionally robust in the face of tighter financial conditions and an economy that is slowing. Looking ahead, momentum for the still-strong services sector will depend on labour market conditions. Resilient services demand could keep inflation sticky, putting more pressure on the Fed to keep going with rate hikes. The FOMC is expected to raise rates by 25 bps this afternoon (2 pm) and we’ll hear from Chair Powell shortly after
- BMO
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