Services Indexes Showing Mixed To Stronger Results

The services PMI for April came in at a soft but still expansionary plus-50 reading of 52.8 in April, up from 52.1 in April's flash and 51.3 in March. April's final is the best reading since January and points to moderate growth for the bulk of the U.S. economy. New orders bounced up from a survey low in March while business activity also improved. Not improving, however, and echoing this morning's ADP report is employment which softened in the month for the weakest rate of growth so far this year. Weakness in employment reflects, to a significant degree, contraction in backlogs which are down for a 9th straight month. Input prices rose in the month, reflecting higher energy costs, but selling prices remained unchanged which points to further pressure on operating margins. Though better than March, the April report still reflects caution over the economic outlook.

Recent History Of This Indicator:
The services PMI has been very soft, running near the breakeven in 50 level in what is a very soft indication for the U.S. economy. Growth in new orders has been the weakest this cycle and backlog orders are down. Uncertainty over the economy and over the presidential election have both been cited as negatives in this report. 

...meanwhile...

ISM non-manufacturing has been among the strongest indicators on the calendar and once again showed strength in April, coming in at 55.7 to just beat out Econoday's high-end forecast by 2 tenths. And the strength is centered where it must be, in new orders which jumped more than 3 points to 59.9 for the best rate of growth since October. And perhaps a surprise plus, at least following this morning's ADP report, is a nearly 3 point gain in employment to 53.0 which is the best reading so far this year.

Another special plus in the report, and the latest indication of strength tied to dollar depreciation, is another solid reading for new export orders which came in at 56.5. This is 2 points below March outside of which, however, is still the best reading since July last year. Imports also rose, up 1 point to 54.0 and contrasting with weakness in first-quarter trade data to hint at an upturn in business expectations for domestic demand.

This report comes at a good time when much of the economic data have been weakening not strengthening. And the gain for employment is definitely a plus ahead of Friday's monthly jobs report.

Recent History Of This Indicator:
The ISM non-manufacturing index ended seven months of slowing with a solid gain in March to 54.5, a level that is expected to be roughly repeated in April at 54.7. New orders have been rising and backlog orders have been building. Export orders have also been strong. This report, unlike the services PMI, has been pointing to healthy overall conditions.