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Services sector slower in April

Expansion streak in its 11th month by Compiled Democrat-Gazette Staff From Wire Reports | May 6, 2021 at 1:53 a.m.
FILE - In this Wednesday, March 10, 2021 file photo, waiter Jose Bravo, center, delivers food for Alberto Castaneda, left, and his wife, Esther, at Picos restaurant in Houston. The Institute for Supply Management, an association of purchasing managers, reported Monday, April 5 that the U.S. services sector, which employs most Americans, recorded record growth in March as orders, hiring and prices all surged. (AP Photo/David J. Phillip, File)

WASHINGTON -- Activity in the U.S. services sector, where most Americans work, slowed slightly in April after hitting an all-time high in March.

The Institute for Supply Management said its monthly survey of service industries showed a drop to a still high reading of 62.7, 1 percentage point lower than the record high of 63.7 set in March.

Any reading above 50 indicates the sector is expanding. The April level marks the 11th straight month of expansion in the services sector after a two-month contraction in April and May last year when the country was struggling with widespread shutdowns caused by the coronavirus pandemic.

"The rate of expansion is still strong," Anthony Nieves, chair of the institute's Services Business Survey Committee, said in a statement. "Respondents' comments indicate that pent-up demand is continuing.

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"Production-capacity constraints, material shortages, weather and challenges in logistics and human resources continue to affect deliveries, which has resulted in a reduction of inventories," Nieves said.

The institute's index of business activity among services, which parallels the group's factory production gauge, fell 6.7 points to 62.7 after reaching a series high in March. The new orders gauge slipped to 63.2 from a record.

The services index showed slowdowns in new orders and business activity while employment rose. A measure of services employment rose to 58.8, the highest since September 2018. The pickup reinforces expectations for another month of strong job growth when the government's employment report is issued Friday. The median forecast in a Bloomberg survey of economists calls for an increase of almost 1 million in April nonfarm payrolls.

Seventeen service industries reported growth in April, led by sectors that included entertainment and recreation, wholesale trade and construction. The category that includes agriculture was the only industry reporting a decline last month.

A gauge of prices paid by service providers climbed for a third straight month. At 76.8, it's the highest level since July 2008. The consistent price gains may stoke further debate on the inflationary pressures building across the economy.

The report, which covers the industries that make up almost 90% of the economy, follows data out earlier this week that showed supply chain challenges and materials shortages limited further momentum in the manufacturing sector.

"Expansion in services was ongoing in April even as supply chain disruptions were a headwind," said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. "The outlook for the services sector remains positive, aided by a broader resumption of activity" in the overall economy.

Information for this article was contributed by Martin Crutsinger of The Associated Press and by Reade Pickert of Bloomberg News.

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