Services sector growth continued in April, rising for the 10th consecutive month, according to the new edition of the Services ISM Report on Business, which was released today by the Institute for Supply Management (ISM).

The April Services PMI, at 51.6 (a reading of 50 or higher signals growth) increased 0.8% over March, growing, at a faster rate, for the 10th consecutive month, and for the 56th time in the last 59 months, going back to the initial recovery from the pandemic in June 2020. It was 1.0% below the 12-month average of 52.6, with October 2024’s 55.8 and June 2024’s 49.2 marking the respective high and low readings over that period.

ISM reported that 11 of the services sectors it tracks saw growth in April, including: Accommodation & Food Services; Wholesale Trade; Mining; Real Estate, Rental & Leasing; Retail Trade; Arts, Entertainment & Recreation; Health Care & Social Assistance; Transportation & Warehousing; Information; Educational Services; and Utilities. Sectors seeing contraction included: Agriculture, Forestry, Fishing & Hunting; Professional, Scientific & Technical Services; Finance & Insurance; Management of Companies & Support Services; Public Administration; and Construction.

The report’s subindexes that factor into the NMI largely were mixed from March to April, including:

• Business Activity/Production: at 53.7, down 2.2% from March, growing, at a slower rate, for the 59^th consecutive month, with 10 sectors reporting an increase in business activity;
• New Orders, at 52.3, increased 1.9%, growing, at a faster rate, for the 10^th consecutive month, after contracting in June 2024 for the second time since May 2020, with eight sectors reporting growth, and hitting its highest reading since December;
• Employment, at 49.0, up 2.0%, contracting, at a slower rate, for the second consecutive month, with eight sectors reporting increases; and
• Supplier Deliveries, at 51.3 (a reading above 50 indicates slower deliveries), was up 0.7% over March, with 11 sectors reporting slower deliveries

Comments from ISM member panelists included in the report highlighted various trends in the services sector, with tariffs again receiving a fair amount of attention.

A Transportation & Warehousing panelist said that tariffs and concerns about government grants still impacting his company’s procurement operations, adding that some projects are slowing or being held off to ensure it has funds to complete the current work.

And a Health Care & Social Assistance panelist said that, “We are actively reviewing the impact of tariffs. We are seeing some vendors increasing their prices, and we are actively pushing back on those increases. We expect our vendors to honor our contracted pricing.”

In an interview, Steve Miller, Chair of the ISM Services Business Survey Committee, said that while the Services sector continues to see growth, employment is contracting but not to the same extent it was in March, when it fell 7.7%, calling decreases in that segment a natural thing during periods of uncertainty.

“That leads to companies needing to figure things out and put the brakes on, in terms of hiring, and the people that are going to do reductions are going to do them anyway, which can be viewed as a negative moment,” he said.

Looking at April’s Imports (down 8.3% to 44.3, for its lowest reading since June 2024) and New Export Orders (up 2.8% to 48.6), Miller said those tallies are concerning.

“With most imports, there is maybe six weeks between the time something is ordered and is shipped,” he said. “There is a lot flying from Singapore, from an electronics standpoint, with companies trying to get ahead of these [tariff and trade policy] actions. But for goods moving on a boat, you can’t order anything, and you don’t want to anyway…you can cover some issues with existing inventory to get a little bit of breathing room.”

As for how the Services sector is faring on a year-to-date basis through April, Miller said that, despite the trade issues, things a bit stronger than compared to the end of 2024, when the ISM issued its Semi-Annual report, which called for a flat first half of the year followed by growth over the second half of the year. Second half growth, he said, is likely to be contingent on New Orders’ growth.

Representing what Miller called a “red flag” is the what may happen in terms of pricing, coupled with the end of the 90-day reciprocal tariffs pause on July 9. The April Prices reading, at 65.1, increased 4.2% and increased, at a faster rate, for the 95^th consecutive month.

“We have been buying things and accelerated our imports in March but fell way off in April,” he said. “And we are seeing a spike in pricing, with April at its highest level since June 2023, at 65.8 [its fifth straight month over 60 and 30^th straight below 70]. If reciprocal tariffs go back in, you see a continued reduction in exports, and I think that will have an impact as to whether prices can stick or not. We’ve had 60s since December in pricing, and then we have concerns around a recession, but seeing some slow growth in services and some slow contraction in manufacturing. If that continues, I think, everybody’s going to be kind of OK. If we see reciprocal tariffs go back in place without any resolution for our major trading partners, that’s going to be a big deal.”