April data pointed to only a modest rebound in business activity across the U.S. service economy. At 52.1, up from 51.3 in March, the seasonally adjusted Markit Flash U.S. Services PMI™ Business Activity Index picked up further from February’s 28-month low and was above the neutral 50.0 threshold. The latest survey indicated that business activity expanded at a slightly faster pace than that recorded during the first quarter of 2016 (51.4 on average).
However, growth momentum remained much weaker than that seen on average since the survey began in late-2009. Survey respondents suggested
that subdued client demand and less favourable underlying economic conditions had weighed on business activity at their units in April. Reflecting this, latest data signalled only a marginal rebound in new business growth from the survey-record low recorded in March.
A relatively weak upturn in new work contributed to slower job creation across the service economy in April. Payroll numbers have expanded continuously for just over six years, but the latest increase was the softest since October 2015 and weaker than the post-crisis trend. At the same time, service providers indicated another modest drop in backlogs of work in April, suggesting a lack of pressure on operating capacity.
Looking ahead, service sector firms expect business activity growth during the next 12 months. However, the degree of optimism picked up only fractionally from March’s post-crisis low and was much weaker than the average since the survey began in late-2009. Anecdotal evidence from service providers cited the strong dollar, subdued domestic economic conditions and uncertainty related to the presidential election as factors that had held back business confidence in April.
The latest survey highlighted that input price inflation picked up slightly across the service economy and was the fastest since November 2015. Nonetheless, the latest increase in cost burdens was only modest in comparison to the survey average. April data meanwhile indicated a renewed fall in average prices charged by service providers, with the pace of decline the most marked for seven months.
The seasonally adjusted Markit Flash U.S. Composite PMI Output Index registered 51.7 in April, up fractionally from 51.3 in the previous month and the highest reading since January. A faster upturn in service sector activity (‘flash’ index at 52.1 in April) more than offset a near-stalling of manufacturing production growth (‘flash’ output index at 50.3).