The latest data from the Institute for Supply Management shows that the health of the U.S. economy might be in trouble. The service sector, which includes things like restaurants, hotels, and other services, is losing steam. The ISM’s Services Purchasing Managers Index dropped to 49.4 from March’s reading of 51.4. This means the sector is shrinking rather than growing, which wasn’t what economists were expecting. In these kinds of indexes, a number above 50 means the economy is growing, and below 50 means it’s shrinking. The bigger the difference from 50, the faster the economy is growing or shrinking.
Anthony Nieves, who leads the ISM Services Business Survey Committee, explained that the composite index showed a decline in April after growing for 15 months straight. This is the first time it’s shrunk since May 2020. He noted that the last time it contracted was in December 2022.
When a disappointing report on nonfarm payrolls was released at 8:30 am EDT, gold prices fell to their lowest point of the day. However, the reaction to the services data was not as strong. Currently, spot gold is trading at $2,289.88 per ounce, down by 0.59% for the day.
The report’s components showed a significant weakening overall. For example, the New Orders Index dropped to 52.2 from 54.4 in the previous month. Similarly, the Business Activity Index fell to 50.9 from March’s reading of 57.4.
The job market in the service sector is still struggling, with the Employment Index dropping to 45.9, which is lower than the previous month’s 48.5. According to Nieves, this is because it’s hard for businesses to find people to fill open positions or control how much they spend on labor.
Nieves also mentioned that while twelve industries saw growth in April, the overall business activity has slowed down. This is because new orders are growing slower, deliveries from suppliers are getting faster, and the number of people employed is still shrinking. Survey responses show that businesses are slowing down overall, but the extent varies from one company to another and from one industry to another.
Nieves also mentioned that most people surveyed are worried about inflation and geopolitical problems.
The disappointing performance in the service sector comes just two days after the ISM’s April Manufacturing PMI dropped to 49.2 from March’s 50.3. This was worse than expected, as most predictions were for a smaller decline to 50.0.
