Summary by Bloomberg AI
- The Institute for Supply Management’s index of services increased 0.8 point to 51.6 last month, indicating expansion.
- The prices-paid gauge jumped 4.2 points to a more than two-year high of 65.1, with nearly 40% of purchasing managers reporting higher prices.
- Eleven industries reported growth last month, led by accommodation and food services, while six industries contracted.
By Mark Niquette
05/05/2025 08:10:54 [BN]
(Bloomberg) — Activity at US service providers accelerated in April after a slumping in the prior month, while materials prices increased in response to escalating tariffs.
The Institute for Supply Management’s index of services increased 0.8 point to 51.6 last month, the group said Monday. Readings above 50 indicate expansion, and the latest figure was stronger than all but one forecast in a Bloomberg survey of economists.
The prices-paid gauge jumped by 4.2 points to a more than two-year high of 65.1. Nearly 40% of purchasing managers reported higher prices, the largest share since November 2022.
“Regarding tariffs, respondents cited actual pricing impacts as concerns, more so than uncertainty and future pressures,” Steve Miller, chair of the ISM Services Business Committee, said in a statement. “Respondents continue to mention federal agency budget cuts as a drag on business, but overall, results are improving.”
The group’s new orders gauge increased 1.9 points to 52.3, the highest this year, and employment contracted at a slower pace. At the same time, a measure of business activity, which parallels the ISM’s factory output gauge, fell to the lowest level since June.
The overall index suggests the services sector is holding up even as manufacturing contracts on the heels of higher US duties. Tariffs are the cornerstone of the Trump administration’s policy to address trade imbalances, increase domestic production and bolster national security.
Eleven industries reported growth last month, led by accommodation and food services, wholesale trade, mining and real estate. Six industries contracted.
Select ISM Industry Comments
“Sales and traffic have improved on track with year-over-year seasonal trends. We seem to be outperforming some of the publicly traded restaurants reporting results.” — Accommodation & Food Services
“Tariffs are negatively impacting small-business customers. Many small-business customers source their products from China. They cannot afford to compete in the marketplace sourcing from other countries.” — Agriculture, Forestry, Fishing & Hunting
“Business is steady.” — Construction
“We are actively reviewing the impact of tariffs. We are seeing some vendors increasing their prices, and we are actively pushing back on those increases.” — Health Care & Social Assistance
“Our business is in a state of crises with uncertainty caused by both the ongoing trade war and the threats to federal funding of programs.” — Public Administration
“Uncertainty remains the dominating theme as the U.S. government has been maddeningly inconsistent with tariff implementation.” — Real Estate
“Tariffs and concerns about government grants still impacting our procurement operations. Some projects are slowing or being held off to ensure we have funds to complete the current work.” — Transportation & Warehousing
“We are starting to see some tariff charges, some are significant given the price of the highly specialized units that were ordered over two years ago. Based on our spend over the last couple of years, we will have to adjust our capital and operations and maintenance plans.” — Utilities
Data last week showed manufacturing activity shrank in April by the most in five months.
A measure of imports fell by 8.3 points — the most since June — to 44.3, suggesting the strategy of rushing in foreign-made goods ahead of tariffs is drawing to a close.
“Now they have the flexibility to wait a bit to see how the actual tariffs get implemented in order to make final decisions,” Miller said on a call with reporters.
A gauge of inventories at service providers climbed to the highest since October.