The Flash S&P Global Flash US Services Business Activity Index for April increased to 53.7%, ahead of a consensus 51.5% and just over 52.6% in March. The US services sector business confidence was the 2nd highest in a year. The upturn in output at service providers was the quickest for a year and solid overall, as greater employment and stronger demand supported the increase S&P said. New business grew for the second successive month in April, as the rate of expansion accelerated to the fastest since May 2022.
Business activity for the services sector, which comprises the largest component of U.S. economic activity, has quickly rebounded into growth mode after contracting for the first time since May 2020 in December. The sector has grown in 32 of the last 33 months, with the lone contraction in December. This is supportive for the soft-landing scenario.
The dividing line between expansion and contraction is 50.0%.
April data indicated a faster rise in business activity at firms based in the US, according to the latest ‘flash’ PMI™ data from S&P Global. Output rose at the sharpest pace for almost a year, as stronger demand conditions, improving supply and a steeper uptick in new orders supported the expansion. Solid growth in activity was seen across both the manufacturing and service sectors.
Flash US PMI Composite Output Index for April 2023
- Flash US PMI Composite Output Index (1) at 53.5 (March: 52.3). 11-month high.
- Flash US Services Business Activity Index(2) at 53.7 (March: 52.6). 12-month high.
- Flash US Manufacturing Output Index(4) at 52.8 (March: 50.2). 11-month high.
- Flash US Manufacturing PMI (3) at 50.4 (March: 49.2). 6-month high.
S&P Global Flash US Services PMI April 2023 Highlights
- Flash US Services Business Activity Index(2) at 53.7 (March: 52.6). 12-month high.
- Quickest for a year and solid overall, as greater employment and stronger demand supported the increase.
- New business grew for the second successive month in April, as the rate of expansion accelerated to the fastest since May 2022.
- Business confidence at service sector firms picked up to the second-highest for almost a year in April, as firms remained hopeful of further improvements in demand.
- Inflation and pressure on costs from rising interest rates continued to weigh on sentiment, however, as optimism was below the historic trend level
- Improved marketing initiatives, greater domestic demand and the acquisition of new customers were reportedly behind the latest uptick in new orders.
- Weighing on the overall rise was a further marginal decline in new export orders. The export fall was the slowest in the current 11-month sequence of contraction, however.
- Although slower than seen throughout 2022, the rate of cost inflation at service providers quickened in April. The pace of increase was sharper than the series average as companies noted that higher borrowing costs and general inflationary pressures added to business expenses.
- Selling prices increased at a sharper pace, as firms responded to higher cost burdens by passing these through to customers where possible amid more accommodative demand conditions. The rate of inflation accelerated for the third month running and was the quickest since last August.
- Pressure on capacity and a modest accumulation of backlogs of work led to the fastest rise in employment at service providers since July 2022. Firms mentioned that their ability to hire had improved, which supported job creation.
Comments
Commenting on the US flash PMI data, Chris Williamson, Chief Business Economist at S&P Global
Market Intelligence said:
“The latest survey adds to signs that business activity has regained growth momentum after contracting over the seven months to January. The latest reading is indicative of GDP growing at an annualized rate of just over 2%.
“Growth is also reassuringly broad-based, led by services thanks to a post-pandemic shift in spending away from goods, though goods producers are also reporting signs of demand picking up again.
“Jobs growth has accelerated alongside the resurgence of demand, aided by reports of vacancies being more easily filled, reflecting improved supply of candidates and higher wages.
“However, the upturn in demand has also been accompanied by a rekindling of price pressures. Average
prices charged for goods and services rose in April at the sharpest rate since September of last year, the rate of inflation having now accelerated for three successive months. This increase helps explain why core inflation has proven stubbornly elevated at 5.6% and points to a possible upturn – or at least some stickiness – in consumer price inflation.
About the PMI™ (Purchasing Managers’ Index™)
The US PMI™ (Purchasing Managers’ Index™) is produced by S&P Global and is based on original survey data collected from a representative panel of around 800 companies based in the US manufacturing and service sectors. The flash estimate is based on around 85% of total PMI survey responses each month and is designed to provide an accurate advance indication of the final PMI data.
The average differences between the flash and final PMI index values (final minus flash) since comparisons were first available in October 2009 are as follows (differences in absolute terms provide the better indication of true variation while average differences provide a better indication of any bias)
The Purchasing Managers’ Index™ (PMI ™) survey methodology has developed an outstanding reputation for providing the most up-to-date possible indication of what is really happening in the private sector economy by tracking variables such as sales, employment, inventories and prices. The indices are widely used by businesses, governments and economic analysts in financial institutions to help better understand business conditions and guide corporate and investment strategy. In particular, central banks in many countries (including the European Central Bank) use the data to help make interest rate decisions. PMI ™ surveys are the first indicators of economic conditions published each month and are therefore available well ahead of comparable data produced by government bodies.
S&P Global do not revise underlying survey data after first publication, but seasonal adjustment factors may be revised from time to time as appropriate which will affect the seasonally adjusted data series. Historical data relating to the underlying (unadjusted) numbers, first published seasonally adjusted series and subsequently revised data are available to subscribers from S&P Global.
Final April data are published on 1 May for manufacturing and 3 May for services and composite indicators
Source: S&P Global
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