April US ISM services index 62.7 vs 64.1 expected

April ISM service sector data

  • Prior was 63.7
  • New orders 63.7 vs 67.2 prior
  • Prices paid 76.8 vs 74.0 prior (highest since at least 2008)
  • Employment 58.8 vs 57.2 prior
  • Full report

The market would have been leaning towards a higher number after the surprise jump in the Markit survey but instead orders are a bit soft and production fell by 6.7 pp.

More details:

  • Production 62.7 vs 69.4 prior
  • backlog of orders 55.7 vs 50.2 prior
  • new export orders 58.6 vs 55.5
  • imports 55.7 vs 50.7 prior
  • supplier deliveries 66.1 vs 61.0
  • inventory change 49.1 vs 54.0
  • inventory sentiment 46.8 vs 52.7 prior

The fall in inventories mirrors what we saw in the manufacturing index. Bottlenecks are increasingly weighing on activity and I think that’s a big emerging story.

Comments in the report:

  • “Restaurant capacity is increasing quickly as restrictions are
    removed. Consumers have pent-up demand; sales are increasing, and the
    labor pool is tight. Supply chain is challenged at every level as
    businesses across the U.S. ramp up.” (Accommodation & Food Services)
  • “Delays in container deliveries are now impacting our business.” (Agriculture, Forestry, Fishing & Hunting)
  • “Consistent with the past year, labor continues to be the biggest
    issue we are facing. Finding and retaining labor – skilled and unskilled
    – is highly challenging and frustrating. As the challenges continue, we
    are not accepting all the work that we could if we had the labor.”
  • “Higher volume of activity in anticipation of a reopening of the campus in the fall of 2021.” (Educational Services)
  • “Conditions are good for the market/industry. Continuing to trend
    under budget for operating expenses. Outlook is positive for the second
    quarter of 2021.” (Finance & Insurance)
  • “Elective surgeries coming back to pre-COVID-19 rates. Patient
    census continues to drop, as it does this time of year.” (Health Care
    & Social Assistance)
  • “Overall, there is pricing pressure for goods and services in the market.” (Information)
  • “Supply has been dwarfed by demand [and] ocean-transport logistics
    imbalances with ships and containers. North America parcel carriers
    swamped with volume-processing constraints, and highway carriers can’t
    supply drivers, regardless of choked original equipment manufacturer
    [OEM] truck orders. Rail intermodal is only competitive among two dozen
    or so origins, to about as many destinations.” (Professional, Scientific
    & Technical Services)
  • “Business is generally upbeat. There is pent-up demand and
    resources, especially people. The pandemic, while not over, is subsiding
    in most places with the vaccines. Many people who were previously
    unable to think about relocating for jobs are now doing so. Other areas
    of the economy are opening up. Many medical treatments that were not
    critical and were put off are now being administered.” (Public
  • “Business levels are quite strong as we head into the spring construction season.” (Real Estate, Rental & Leasing)
  • “Business optimism is high. Orders are picking up, and there is a strong demand for capital investments.” (Utilities)
  • “Business is very robust, but logistics and supply cannot keep up.” (Wholesale Trade)

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