U.S Service Sector Continues Expansion In April, Pace Slows – Survey

The US service sector last month continued its recovery from the pandemic, according to an industry survey released Wednesday, but the pace slowed slightly as companies faced supply chain complications.

The Institute for Supply Management (ISM) said its service sector index dipped to 62.7 percent in April, below expectations and one percentage point lower than March.

But the index remained well above the 50-percent level indicating expansion.

The survey was good news for the sector, which was the hardest-hit by business restrictions that began in March 2020.

Those measures are now being rolled back across the United States as vaccinations become widespread, and Americans increasingly venture out to travel, shop and dine.

However, the economic reopening is not going completely smoothly, with supply chains struggling to deal with resurgent demand for raw materials and finished products, challenges the services sector is not immune to, ISM said.

“Production-capacity constraints, material shortages, weather and challenges in logistics and human resources continue to affect deliveries, which has resulted in a reduction of inventories,” the survey’s chair Anthony Nieves said in a statement.

ISM reported a more than five point increase in the supplier deliveries index indicating slower deliveries, as well as 2.8-point increase in prices to 76.8 percent.

However, employment rose almost two points to 58.8 percent as the economy reopens, spurring companies to bring employees back.

Oren Klachkin of Oxford Economics said the supply chain issues may drag on growth temporarily, but the sector was poised for a sustained rebound in the months to come. “The underlying details stayed positive overall, as business activity and new orders remained firmly in expansion territory and the employment recovery gained momentum,” he said.