The numbers: The huge service side of the U.S. economy grew rapidly in April as states lifted business restrictions, companies hired more workers and consumers spent their stimulus checks.
A survey of service-oriented businesses such as retailers, restaurants and health-care providers slipped to 62.7% last month from 63.7% in March, the Institute for Supply Management said Wednesday. The March reading was the highest since ISM began the survey in 1997.
Readings above 50% signal an expanding economy, and numbers above 55% are a sign of broad strength.
The ISM survey fell a bit short of Wall Street expectations. Economists polled by Dow Jones and The Wall Street Journal had forecast the index to edge up to 64.1%.
“There was slowing growth in the services sector in April,” said Anthony Nieves, chairman of the survey. “However, the rate of expansion is still strong. Respondents’ comments indicate that pent-up demand is continuing.”
Seventeen of the 18 service industries tracked by ISM expanded last month, an usually high number. Seldom are most industries all expanding at the same time.
What happened: Seventeen of the 18 service industries tracked by ISM expanded last month, an usually high number. Seldom are most industries all expanding at the same time.
New orders and production both slowed from extraordinarily high levels in March, but they were still extremely strong. Each index topped 60%.
Employment rose again. The employment barometer increased 1.6 points to a two-and-a-half year high of 58.8%.
The biggest worry is a shortage of key parts and supplies, a problem that’s bedeviled almost every major industry from agriculture to manufacturing.
“Business is very robust, but logistics and supply cannot keep up,” said a senior executive at a wholesaler
As a result, prices are rising rapidly and stoking U.S. inflation. The price gauge climbed to 76.8% and hit the highest level since 2008.
Big picture: Most companies are growing again and seeking to hire on the expectation that coronavirus cases will keep falling rapidly. The economy surged in the first quarter and even faster growth is expected in the months ahead.
The biggest obstacles? Obtaining enough supplies at reasonable prices, a problem compounded by lingering disruptions in global supply chains due to the pandemic. Those problems will eventually ease, but it could be a handicap for months to come.