Following the mixed (PMI up, ISM down) message from Manufacturing, the Services sector was just as mixed (PMI up, ISM down). However, one message is clear from all the surveys – prices are rising… fast!
Markit’s Services PMI showed a bounce as business confidence jumped to its highest since May 2015.
ISM‘s Services survey disappointed, dropping to 56.8 from 58.8.
Under the hood, ISM Services data was mixed too… new orders up, business activity and employment fell… and prices paid continued to rise.
Commenting on the Composite PMI data’s modest rise, Chris Williamson, Chief Business Economist at IHS Markit said:
“The improved service sector performance comes on the heels of news of faster manufacturing growth, pointing to a welcome broad-based strengthening of the economy at the start of the second quarter.
“As such, the data support the view that second quarter GDP growth will come in stronger than the 2.3% rate seen at the start of the year.
“The two surveys also collectively point to another month of solid job gains, commensurate with the official measure of non-farm payrolls rising by approximately 200,000 in April.”
Finally, Williamson notes that perhaps the most important development, however, is the upturn in price pressures.
“Survey evidence indicates that rising demand has allowed increasing numbers of companies to raise prices for both goods and services in recent months. Higher oil prices are also pushing up costs. Measured across both manufacturing and services, input costs are rising at the fastest rate since 2013, which will inevitably put greater pressure on consumer prices in coming months, all of which makes for a hawkish policy outlook.”
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