US services activity shrinks for first time since 2022: survey

Activity in the US services sector contracted last month, a first since December 2022, on the back of a cooldown in business and slower growth in orders, according to survey data released Friday.

The services index of the Institute for Supply Management (ISM) slipped unexpectedly to 49.4 percent in April, dipping below the 50-point mark separating growth from contraction.

Analysts generally expected the sector to continue growing.

The reading was a shift from March's reading of 51.4 percent and ended a stretch of 15 straight months of growth.

"The decline in the composite index in April is a result of lower business activity, slower new orders growth, faster supplier deliveries and the continued contraction in employment," said ISM survey chair Anthony Nieves.

The business activity index slid 6.5 percentage points to 50.9 percent in April while the new orders index dropped 2.2 percentage points to 52.2 percent.

Meanwhile, the employment index contracted for the fourth time in five months, said ISM.

Survey respondents indicated that business is generally slowing overall, said Nieves.

"The majority of respondents indicate that inflation and geopolitical issues remain concerns," he added.

With the US service sector showing surprising resilience despite high interest rates, "the data bear watching for a more persistent weakening in activity going forward," said Rubeela Farooqi, chief US economist at High Frequency Eco