US Services Sector Slows In April Amid Record Costs

US Services Sector Slows In April Amid Record Costs

After the somewhat surprising rebound in PMIs in March, preliminary April data shows a significant divergence between US Services (notably lower) and US Manufacturing (notably higher)

Source: Bloomberg

Service sector firms registered the fastest rise in cost burdens since October 2009, when data collection began.

Goods producers recorded the sharpest uptick in expenses since November 2021’s record rise   

In an effort to pass through higher cost burdens to clients, businesses signalled the steepest rise in output charges on record. Manufacturers and service providers alike reported series-record increases amid soaring input prices. Some companies also stated that surcharges were added to selling prices to account for more frequent upticks in operating expenses  

The headline Flash US PMI Composite Output Index registered 55.1 in April, down from 57.7 in March. The latest data indicated a strong rise in private sector output, but one that was subdued by the impact of inflation on customer spending. Although service providers recorded a softer upturn in activity, manufacturing firms noted the quickest uptick in production since last July.

Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at S&P Global said:

“Although still indicative of annualised GDP growth of approximately 3%, the April PMI surveys point to the upturn losing some momentum compared to the strong rebound seen in March, when services activity in particular had been buoyed by loosened pandemic restrictions in the US and abroad.

“Many businesses continue to report a tailwind of pent up demand from the pandemic, but companies are also facing mounting challenges from rising inflation and the cost of living squeeze, as well as persistent supply chain delays and labor constraints.

“These headwinds, plus increased concerns over the economic outlook and tightening monetary policy, meant business confidence about the outlook slipped sharply lower in April. However, with the overall pace of economic growth and hiring remaining relatively solid, for now the focus from a policy perspective is likely to remain firmly on the need to rein in the record high inflationary pressures signalled by the survey.”

Finally, we note that the word ‘record’ is found 16 times in the PMI release – a ‘record’ in itself in terms of extreme outliers in today’s US economy.

Tyler Durden
Fri, 04/22/2022 – 09:52

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