On May 4, 2018, the Institute of Supply Management (ISM) stated that the service index in the United States has grown for 99th consecutive month, indicating flourishing non-manufacturing activity.
However, the metric actually came in lower than expected for the month of April. This decline has been the result of trade-war related tensions and Trump’s tariff polices that weighed on service activity.
Despite the decline in April, service activity in the United States expanded for 99 straight months. Further, the fact that all of the 18 sectors tracked by the ISM service index have reported growth in the period underlines the fact that betting on mutual funds having significant exposure to services-related companies makes sense.
Service Activity Strong Despite a Dip
ISM reported on May 3 that non-manufacturing activity for April came in at 56.8%, below the consensus estimate of 58.1% and lower than last month’s figures of 58.8%. A reading above 50 indicates expansion in a sector.
However, the decline should be brushed aside as momentary owing to trade-war tensions that have made suppliers across the globe nervous. With Trump’s decision to postpone the imposition of import tariffs on steel purchases, the worries have somewhat subsided. Further, all the 18 sectors that the metric tracks reported growth last month.
Surge in New Orders and Business Activity
Further, Prices Index advanced by 0.3 percentage points to 61.8%, representing an increase in prices in April for the 26th month on the trot. Moreover, the ISM Business Activity Index registered growth of 59.1% in April, thereby, increasing for the 105th consecutive month. Notably, all of the 15 industries reported an increase in business activity for April.
Looking at other positive developments suggested by the report, the non-manufacturing New Orders Index surged to 60% in April. This represents an advancement for 87 straight months that too at an accelerated rate when compared with March. Finally, the non-manufacturing Employment Index surged to 53.6%, expanding for the 50th month at a stretch.
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