A key survey of the services, financial, and construction industries improved beyond expectations on Tuesday, although overall those sectors remain far from growth. The ISM Non-Manufacturing index posted a 43.7 reading in April, advancing from a 40.8 reading in March.
April is the seventh consecutive month that the survey’s reading has come in below 50, indicating contraction. Analysts were expecting some improvement based on positive news in retail and finance.
The gains were broad-based. Leading the way was a huge improvement in New Orders, which jumped more than 8 points to 47.0, while Production posted a 1.1-point gain to 45.2.
The employment component, which will be used to predict Nonfarm Payrolls on Friday, improved nearly 5 points to 37.0, nearly erasing the prior month’s loss.
Anthony Nieves, chairman of the ISM’s survey committee, pointed out that seven industries were reporting growth in April, in contrast to just one in March.
“Respondents' comments are mixed and they vary by company and industry about economic conditions." Nieves said.
Listed in order, the growth industries include Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Retail Trade; Finance & Insurance; Utilities; Other Services; and Accommodation & Food Services.
Elsewhere in the release, prices were falling for the sixth straight month with a 40.0 score, indicating prices were deflating a bit more slowly than in March.
Both trade components improved dramatically from March. Exports advanced 9.5 points to 48.5, while exports jumped 11.5 points to 48.5. Even with the advance in imports, the inventory level was contracting for the eighth consecutive month.
The ISM Non-Manufacturing survey covers nearly nine-tenths of of the U.S. economy. Its cousin, the ISM Manufacturing index, posted a 40.1 reading last Friday. Manufacturing is given more attention due to its history of being a leading indicator for the broader economy.