MNI INTERVIEW: Service Growth Hinges On Trade War Path - ISM
Service sector activity quickened slightly in April but continued modest growth will depend on an ongoing easing of trade tensions, ISM Services survey chief Steve Miller told MNI Monday.
"It hinges on reciprocal tariffs," Miller said. "If those go back in, we're going to see exports continue to contract, and I think we'll see business activity drop. We'll see that PMI drop."
The ISM's topline indicator last month unexpectedly rose 0.8pp higher to 51.6, above the market consensus of 50.2. A reading above 50 percent indicates the services sector economy is generally expanding. The services outlook depends on the Trump administration's trade policies, he said.
PRICE GROWTH
The ISM business activity index at 53.7 is still expanding, but at a slower pace than March when it registered a reading of 55.9. New orders rose slightly to 52.3. Employment was still in contraction, but is now contracting at a more modest pace, and supplier deliveries came in at 51.3, up from 50.6 last month.
The prices index continued to ascend in April, increasing 4 points to 65.1, the highest reading since January 2023. There were 19 commodities reported up in price, 3 reported down in price, and 4 reported in short supply.
RECONCILIATION
Miller said the timing of when Republicans in Washington pass one large fiscal package will matter a lot for businesses and could impact the Federal Reserve's decision about interest rates.
"Pushing that decision-making out from a budgetary standpoint, that would make me more reluctant to make a change on monetary policy in June, if I were Chair Powell," Miller said. (See: MNI INTERVIEW: Fed On Hold Until Tariff Pause Passes- Lockhart)
