By Susan A. Baird
PBN Web Editor
TEMPE, Ariz. – The U.S. non-manufacturing sector expanded in April for the first time this year, surprising analysts, according to a report today from the Institute for Supply Management.
The trade group’s new Non-Manufacturing Index – a composite index launched this year – “increased 2.4 percentage points to 52 percent, indicating expansion after three consecutive months of contraction within the non-manufacturing sector,” wrote Anthony Nieves, chair of the ISM’s Non-Manufacturing Business Survey Committee and senior vice president of supply management for Hilton Hotels Corp.
It was the first reading above the neutral value of 50 percent for the NMI, which debuted in January at 44.6 percent before rising to 49.3 percent in February and 49.6 percent in March. The April result defied analyst expectations of a 0.5-percentage point decline to 49.1 percent – the median estimate from Bloomberg News survey of 68 economists, whose estimates ranged from 47.5 to 51 percent.
Of the 18 industries tracked by the NMI, 12 reported growth in April, led by arts, entertainment and recreation, the ISM said. Also reporting growth were the real estate, rental and leasing; professional, scientific and technical services; agriculture, forestry, fishing and hunting; mining; wholesale trade; public administration; educational services; construction; utilities; retail trade; and information industries.
Reporting contractions last month were the other services; transportation and warehousing; finance and insurance; accommodations and food services; health care and social assistance; and management of companies and support services categories.
Meanwhile, the older Non-Manufacturing Business Activity Index fell 1.3 percentage points compared with March to an April reading of 50.9 percent. Among its components, Nieves said, “the New Orders Index decreased 0.1 percentage point to 50.1 percent, and the Employment Index increased 3.9 percentage points to 50.8 percent,” its highest level this year. “The Prices Index increased 1.3 percentage points to 72.1 percent in April, indicating a faster rate in price increases than in March.”
“Members’ comments in April continue to be mixed and vary by industry,” Nieves added. “The inflationary pressures of rising fuel, energy and commodity prices are of major concern for members.”
Still, said Julia Coronado, senior U.S. economist at Barclays Capital Inc. in New York, “This is definitely a positive indication that some of the worst outcomes that people are expecting won’t be realized.” Coronado told Bloomberg News she now expects “the economy will weather a period of very weak growth, followed by a modest pick-up later in the year.”
The Institute for Supply Management, the publisher of Inside Supply Management magazine, produces monthly Reports on Business for the manufacturing and non-manufacturing sectors. Additional information is available at www.ism.ws.
