U.S. ISM Services Index Fell to Eight-Month Low in April
U.S. ISM Services Index Decreased to 52.8
Chip Chipman/Bloomberg
Containers are loaded and unloaded from container ships at the Port of Oakland, California.
Containers are loaded and unloaded from container ships at the Port of Oakland, California. Photographer: Chip Chipman/Bloomberg
May 4 (Bloomberg) -- Neal Soss, chief economist for Credit Suisse Holdings USA Inc., talks about the Institute for Supply Management's report that service industries in the U.S. expanded in April at the slowest pace in eight months, and the outlook for the economy and labor market. The ISM's index of non-manufacturing companies declined to 52.8 last month from 57.3 in March. Soss speaks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)
May 4 (Bloomberg) -- John Silvia, chief economist at Wells Fargo Securities LLC, talks about the ADP Employer Services report for April and its implications for the U.S. economic recovery. Companies added 179,000 workers last month signaling the labor market is strengthening, data from the private report based on payrolls showed today. Silvia speaks with Betty Liu and Michael McKee on Bloomberg Television's "In the Loop." (Source: Bloomberg)
May 4 (Bloomberg) -- Michael Feroli, chief U.S. economist at JPMorgan Chase & Co., discusses the Institute for Supply Management's report that service industries in the U.S. expanded in April at the slowest pace in eight months, and the outlook for the economy. The ISM's index of non-manufacturing companies declined to 52.8 last month from 57.3 in March. Readings greater than 50 signal growth. Feroli talks with Margaret Brennan on Bloomberg Television's "InBusiness." (Source: Bloomberg)
U.S. ISM Services Index Decreased to 52.8
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A United Continental Holdings Inc. jet prepares to land at O'Hare International Airport in Chicago.
A United Continental Holdings Inc. jet prepares to land at O'Hare International Airport in Chicago. Photographer: Tim Boyle/Bloomberg
U.S. ISM Services Index Decreased to 52.8
Chip Chipman/Bloomberg
A Muni streetcar leaves a station in San Francisco.
A Muni streetcar leaves a station in San Francisco. Photographer: Chip Chipman/Bloomberg
U.S. ISM Services Index Decreased to 52.8
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A nurse applies a saline wash through an IV at Timpanogos Regional Hospital in Orem, Utah.
A nurse applies a saline wash through an IV at Timpanogos Regional Hospital in Orem, Utah. Photographer: George Frey/Bloomberg
Service industries in the U.S. expanded in April at the slowest pace in eight months as higher fuel prices prompted companies to cut back.
The Institute for Supply Management’s index of non- manufacturing companies declined to 52.8 last month from 57.3 in March. Readings greater than 50 signal growth, and the median forecast of economists surveyed by Bloomberg News called for a gain to 57.5. A gauge of new orders dropped by the most since record-keeping began in 1997.
Stocks fell and Treasuries rose on signs gasoline prices at their highest levels in almost three years are blunting purchases of other goods and services. Employment in the services industry fell to a seven-month low, indicating increased corporate costs may be restraining hiring, one reason why the Federal Reserve last week said it would maintain record monetary stimulus.
“It’s another sign that we’re losing momentum more broadly in this recovery,” said Tim Quinlan, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “Businesses are still concerned about pricing power.”
Estimates in the Bloomberg survey of 73 economists ranged from 54.5 to 59. The Tempe, Arizona-based group’s index of the industry, which accounts for about 90 percent of the economy, averaged 56.1 in the five years to December 2007, when the last recession began.
The Standard & Poor’s 500 Index fell 0.8 percent to 1,346 at 10:52 a.m. in New York. The yield on the benchmark 10-year Treasury note declined to 3.22 percent from 3.25 percent late yesterday.
New Orders
The ISM’s measure of new orders at service providers decreased to 52.7, the lowest since December 2009, from 64.1 in March, while a gauge of business activity, which reflects sentiment among purchasers, fell to 53.7 from 59.7 in March.
The group’s employment gauge dropped to 51.9 from 53.7 a month earlier. The index of prices paid fell to 70.1 from 72.1.
Employment at U.S. companies increased by 179,000 in April, according to figures today from ADP Employer Services. The median estimate in a Bloomberg survey called for a 198,000 gain.
ISM’s index of services industries, which account for about 90 percent of the economy, averaged 56.1 in the five years to December 2007, when the last recession began.
Gasoline Prices
Fueled by spreading unrest in the Middle East, the average price of a gallon of regular gasoline at the pump advanced to $3.97 on May 2, the highest since July 2008, according to data from AAA, the nation’s biggest motoring group.
Forced to spend more for food and fuel, household purchases have cooled. Consumer spending adjusted for inflation rose at a 2.7 percent annual pace in the first quarter, down from 4 percent in the last three months of 2010, the Commerce Department said last week.
The ISM services survey covers industries that range from utilities and retailing to health care, finance and transportation. Today’s report follows the group’s May 2 figures that showed manufacturing grew more than forecast in April, driven by gains in exports and inventories.
The services gauge has averaged 53.1 since the recovery started in June 2009 through March, trailing the 56.2 reading on the group’s factory measure during the same period.
Factory Rebound
The factory rebound, which is driven by exports and corporate investment, is generating more demand for services. Companies like restaurants and airlines are seeing enough demand to pass increased costs onto consumers.
Denver-based Chipotle Mexican Grill Inc. (CMG), the burrito chain spun off from McDonald’s Corp. in 2006, last month reported a 23 percent gain in first-quarter profit as consumers dined out more. The company raised prices last quarter on the West coast and plans to begin increasing prices elsewhere to recover higher costs.
“We continue to believe we have pricing power, but we want to be patient and allow our transactions to hold as strong as possible in this still-recovering economy,” Chief Financial Officer John Hartung said on an April 20 conference call.
The economy probably generated 185,000 jobs in April after gaining 216,000 the prior month, according to the median estimate of economists surveyed by Bloomberg before the Labor Department’s May 6 payrolls report.
Companies are turning more optimistic about hiring. Oak Brook, Illinois-based McDonald’s Corp. (MCD), the world’s largest restaurant chain by revenue, sought as many as 50,000 workers in the U.S. during its National Hiring Day event on April 19.
“The economic recovery is proceeding at a moderate pace and overall conditions in the labor market are improving gradually,” the Fed said last week after its latest policy meeting. “Household spending and business investment in equipment and software continue to expand.”
To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
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