US ISM Services Survey Rebounds in April, Signaling Expansion

The ISM non-manufacturing survey for the month of April surged back above the 50 level to 52.0 from 49.6, signaling expansion in the services sector. Indeed, much of this gain was on the back of improvements in employment conditions, which is something we noted following last week's non-farm payrolls report as the service-related companies were the only sector to actually add on workers. However, this may be due primarily to seasonal factors, and the headline ISM figure is actually a bit misleading. A further breakdown of the report shows that business activity/production and new orders grew at a slower pace, while the component measuring new export orders tumbled to 48.5 from 55, signaling contraction. Furthermore, prices are accelerating at a faster pace, which only underpins the Federal Reserve's inflation concerns. The US dollar has rallied on the news, but given the underlying message of this ISM report, the data will do little to dispel concerns that the US may face a recession.

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