April data pointed to only a modest rebound in business activity across the U.S. service economy. At 52.1, up from 51.3 in March, the seasonally adjusted Markit Flash U.S. Services PMI™ Business Activity Index1 picked up further from February’s 28-month low and was above the neutral 50.0 threshold. The latest survey indicated that business activity expanded at a slightly faster pace than that recorded during the first quarter of 2016 (51.4 on average).
However, growth momentum remained much weaker than that seen on average since the survey began in late-2009. Survey respondents suggested 1 Please note that Markit’s PMI data, flash and final, are derived from information collected by Markit from a different panel of companies to those that participate in the ISM Non-Manufacturing Report on Business. No information from the ISM survey is used in the production of Markit’s PMI. that subdued client demand and less favourable underlying economic conditions had weighed on business activity at their units in April. Reflecting this, latest data signalled only a marginal rebound in new business growth from the survey-record low recorded in March. ‘
A relatively weak upturn in new work contributed to slower job creation across the service economy in April. Payroll numbers have expanded continuously for just over six years, but the latest increase was the softest since October 2015 and weaker than the post-crisis trend. At the same time, service providers indicated another modest drop in backlogs of work in April, suggesting a lack of pressure on operating capacity.
Looking ahead, service sector firms expect business activity growth during the next 12 months. However, the degree of optimism picked up only fractionally from March’s post-crisis low and was much weaker than the average since the survey began in late- 2009. Anecdotal evidence from service providers cited the strong dollar, subdued domestic economic conditions and uncertainty related to the presidential election as factors that had held back business confidence in April.