US: April ISM non-manufacturing survey adds to pullback in confidence - Nomura

Analysts at Nomura note that the US ISM non-manufacturing index declined 2pp to 56.8, below expectations (Nomura: 58.6, Consensus: 58.0).

Key Quotes

“The survey noted that “respondents have expressed concern regarding the uncertainty about tariffs and the effect on the cost of goods,” grouping yesterday’s release with a recent string of business confidence surveys that have deteriorated in light of continued US trade policy uncertainty. Note that the ISM nonmanufacturing survey covers the agricultural sector which faces China’s potential retaliatory tariffs on imports of US agricultural products. Beyond trade, however, the report noted overall optimism about the direction of the economy, despite some tightening of supply chains.”

“Looking at the details, the new orders index held up, increasing 0.5pp to 60.0, indicating that near-term momentum remains intact.”

“The index for business activity inched down to 59.1, from 60.6, but remained elevated by historical standards.”

“The employment index declined 3pp to 53.6, the lowest reading since April 2017, as the pace of hiring slowed from unsustainably high levels in the early months of the year. That said, we continue to expect a strong nonfarm payroll employment gain tomorrow of 220k in the April employment report.”

“The prices paid index remained elevated at 61.8, increasing 0.3pp, consistent with elevated readings of input price growth in other business surveys.”