-- Two surveys released Tuesday painted a mixed picture of the US services sector in April, with Institute for Supply Management data showing a deceleration in growth and an S&P Global (SPGI) report indicating a return to expansion.
The ISM's purchasing managers' index fell to 53.6 last month from 54 in March. The consensus was for a 53.7 print in a survey compiled by Bloomberg. A reading above 50 indicates the services sector economy is generally expanding.
The business activity index rose to 55.9 in April from 53.9 the month before, while the gauge for new orders decreased to 53.5 from 60.6. The employment measure increased to 48 from 45.2, but remained in contraction territory for a second consecutive month, the ISM survey showed.
"The services sector continues to expand, but the sharp cooling in new orders alongside still-subdued employment momentum suggests growth may be becoming less durable," TD Economics Senior Economist Vikram Rai said in a note.
The price index was unchanged at 70.7, staying at its highest level since October 2022, according to the ISM survey.
"With prices holding at their highest level since late 2022, today's report reinforces concerns that services sector inflation remains sticky," Rai said. "Combined with resilient activity levels, this supports the case for the (Federal Reserve) to remain patient, particularly as energy, freight, and labor costs continue to feed through to prices."
Last week, the Fed kept its benchmark lending rate steady for a third straight meeting, saying the Middle East conflict is fueling uncertainty around the US economic outlook.
Separately, S&P Global said Tuesday its services PMI gauge rose to 51 in April from 49.8 the month prior, though growth was "well below" the series average.
New business intakes fell for the first time in two years, as the Middle East war and inflation weighed on demand. Employment increased "slightly," while confidence in the outlook improved, according to the data provider.
"A further increase in input cost inflation reflected not just higher fuel prices but a widening spread of goods and services rising in price, as well as higher wages, which will feed through to consumer price inflation in the coming months," S&P Global Market Intelligence Chief Business Economist Chris Williamson said. "The scale of the price rises will put pressure on the Fed to prevent higher inflation becoming entrenched."
On Friday, ISM and S&P surveys showed that the US manufacturing sector saw continued growth in April, though inflationary pressures intensified amid disruptions caused by the Middle East conflict.
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