The ISM non-manufacturing index increased to 55.2 in April from 53.1 in March.
This was better than the 54.0 economists were forecasting.
Any reading above 50 signals growth in the sector.
“This is the strongest reading since last August and leaves the six-month moving average at 53.5,” noted Barclays’ Cooper Howes.
“At its new level, the ISM non-manufacturing index is consistent with GDP growth of about 2.5% annualised, but we wouldn’t be surprised to see it strengthen further over the next few months and we currently expect that second-quarter GDP growth will be as high as 3.5%,” said Capital Economics’ Paul Ashworth.
The new orders subindex jumped to 58.2 from 53.4, and the export orders subindex ramped up to 57.0 from 49.5.
This more than offset deterioration in the employment subindex, which fell to 51.3 from 53.6.
“If sustained at this level, the index would be consistent with private payroll growth trending at only 130K or so,” said Pantheon Macroeconomics’ Ian Shepherdson. “We hope this weakness is a hangover from the winter – before the weather hit, the index was consistently pointing to 200K-plus gains – but we can’t yet be sure.”
Here’s NMI on the industries:
The 14 non-manufacturing industries reporting growth in April — listed in order — are: Arts, Entertainment & Recreation; Wholesale Trade; Agriculture, Forestry, Fishing & Hunting; Retail Trade; Construction; Public Administration; Accommodation & Food Services; Educational Services; Transportation & Warehousing; Finance & Insurance; Management of Companies & Support Services; Information; Real Estate, Rental & Leasing; and Utilities. The four industries reporting contraction in April are: Mining; Health Care & Social Assistance; Professional, Scientific & Technical Services; and Other Services.
Here are some anecdotes from the survey:
- “Our outlook for 2014 remains on target. No significant changes with our customer base.” (Management of Companies & Support Services)
- “General business conditions are improving.” (Information)
- “Market conditions are generally steady; internal pressure to reduce overall cost of goods and services.” (Finance & Insurance)
- “Business levels have been stable. Our company made an acquisition this past month, so we are planning for revenue growth in the second half of 2014.” (Real Estate, Rental & Leasing)
- “Traffic and sales are up due to break in weather.” (Accommodation & Food Services)
- “Overall spending continues to trend upward, particularly for large dollar items, like vehicles and aircraft, as the state replenishes the fleet that was depleted during 2009 — 2013.” (Public Administration)
- “We are experiencing a pickup in sales, which has brought back a little optimism that we may have seen the floor, and things could be turning up. We are making investments to take advantage of the upswing to leverage as many sales options as possible.” (Retail Trade)
Here’s a breakdown of the subindexes:
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