Latest news with #servicessector
Zawya
6 days ago
- Business
- Zawya
US service sector unexpectedly contracts in May; inflation heats up
The U.S. services sector contracted for the first time in nearly a year in May while businesses paid higher prices for inputs, a reminder that the economy remained in danger of experiencing a period of very slow growth and high inflation. The Institute for Supply Management (ISM) said on Wednesday its nonmanufacturing purchasing managers index (PMI) dropped to 49.9 last month, the first decline below the 50 mark and lowest reading since June 2024, from 51.6 in April. Economists polled by Reuters had forecast the services PMI rising to 52.0 following some easing in trade tensions between the United States and China. A PMI reading below 50 indicates contraction in the services sector, which accounts for more than two-thirds of the economy. The ISM associates a PMI reading above 48.6 over time with growth in the overall economy. The ISM on Monday reported that manufacturing contracted for a third straight month in May, with suppliers taking the longest time in nearly three years to deliver inputs amid tariffs. President Donald Trump's import duties, which at times have been implemented in a disorderly manner, have sowed confusion among businesses. Economists say the tariff uncertainty was making it difficult for businesses to plan ahead. Businesses from retailers, airlines to motor vehicle manufacturers have either withdrawn or refrained from giving financial guidance for 2025. While economists do not expect a recession this year, stagflation is on the radar of many. The ISM survey's new orders measure dropped to 46.4 from 52.3 in April, likely with the ebbing of the boost from front-running related to tariffs. Services sector customers viewed their inventory as too high in relation to business requirements, which does not bode well for activity in the near term. Suppliers' delivery performance continued to worsen. This, together with lengthening delivery times at factories, points to strained supply chains that could drive inflation higher through shortages. Businesses are also seeking to pass on tariffs, which are a tax, to consumers. The ISM survey's supplier deliveries index for the services sector rose to 52.5 from 51.3 in April. A reading above 50 indicates slower deliveries. A lengthening in suppliers' delivery times is normally associated with a strong economy. Delivery times are, however, likely getting longer because of bottlenecks in the supply chains. That was reinforced by a surge in the survey's measure of prices paid for services inputs to 68.7, the highest level since November 2022, from 65.1 in April. Most economists anticipate the tariff hit to inflation and employment could become evident by summer in the so-called hard economic data. Services sector employment picked up. The survey's measure of services employment rose to 50.7 from 49.0 in April. The government is expected to report on Friday that nonfarm payrolls increased by 130,000 jobs in May after advancing by 177,000 in April, a Reuters survey of economists showed. The unemployment rate is forecast to hold steady at 4.2%, with greater risks of a rise to 4.3%. (Reporting By Lucia Mutikani; Editing by Chizu Nomiyama )
The Guardian
6 days ago
- Business
- The Guardian
UK service sector confidence higher in June than since before autumn budget
Bosses in the UK's services sector were more optimistic last month than they had been since before Rachel Reeves' debut budget, according to new data, as they began to see beyond the uncertainty sparked by Donald Trump's tariff war. A survey of business leaders showed many were looking forward to improved sales and investment over the next six months, despite an increase in US import tariffs to their highest level since the 1930s. The S&P Global purchasing managers' index (PMI) rose from April's 27-month low of 49.0 to 50.9, when a figure above 50 indicates a period of expansion. Services companies have been unaffected directly by tariffs imposed by the White House, which have so far been levied on goods such as steel and cars. But they have suffered from the dampened effect on global consumer and business confidence. Tim Moore, economics director at S&P Global, said the services sector, which represents about three-quarters of the UK's business activity, had 'regained its poise' in May after 'improving confidence among clients and fewer reports of tariff concerns'. He added: 'Optimism reached its highest level since October 2024, which reflected forthcoming business investment plans alongside hopes of a turnaround in sales pipelines and improving domestic economic prospects.' Optimism among UK businesses fell in the wake of the chancellor's first budget in late October, which included increased taxes on UK companies. Some analysts said the survey showed the UK business sector had proved to be stronger than many forecasters predicted. Official figures showed the economy expanded by 0.7% in the first three months of the year. Rob Wood, chief UK economist at the consultancy Pantheon Macroeconomics, said: 'UK growth has passed the worst as president Trump walking back his more ruinous tariffs cuts the panic that took hold in April.' He accused the Bank of England of being too pessimistic about the resilience of the UK economy after the PMI and other survey data showed 'the domestic economy is likely expanding steadily, if unspectacularly'. The index was higher than a first estimate reading last month that showed the services sector had recovered, but only to 50.2. Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion Mark Swannell, chief economic adviser to the EY Item Club, said the higher services PMI and a weaker recession in manufacturing pushed the composite PMI, which brings together responses from manufacturing and services businesses, into positive territory for the first time since March. Moore said the aftermath of the tariff shock in April was still taking a toll on sales and employment in May, with firms reacting to lower orders by continuing to lay off staff. He said: 'Prevailing demand conditions remained challenging in May, as signalled by a sustained reduction in total new orders across the service economy. Survey respondents mostly cited cuts to discretionary business and consumer spending.' Moore added: 'Reduced workloads and pressure on margins from increased payroll costs meant that headcounts remained under close scrutiny. Aside from the pandemic, the current eight-month period of falling employment numbers is the longest streak since 2008-10.' Reeves will expect her pledges to increase investment in road and rail projects across the regions, which she announced on Wednesday, to further boost private sector optimism and business investment.
Reuters
28-05-2025
- Business
- Reuters
UK services sector sentiment hits 2-1/2-year low, CBI says
LONDON, May 29 (Reuters) - Business confidence in Britain's services sector hit a two-and-a-half-year low in the quarter to May and cost pressures are ramping up partly as a result of employment tax rises, the Confederation of British Industry said on Thursday. Its gauge of morale in business and professional services companies fell to -43% in May from -28 in February, its lowest since November 2022. The mood at consumer-facing services firms soured too, the CBI said. Expectations for price increases grew in business and professional services firms at the fastest pace in two years, although they receded a little compared with the previous survey for consumer-facing services firms. The CBI highlighted concern among companies about the 25 billion pounds ($33.78 billion) increase in social security contributions paid by employers, announced by finance minister Rachel Reeves last October, and a nearly 7% rise in the minimum wage, both which came into force in April. "The double whammy of both cost and price pressure ramping up is particularly worrying, given the Bank of England's concern about the persistence of domestic inflationary pressures," Alpesh Paleja, deputy chief economist at the CBI, said. "Businesses continue to cite the impact of higher employer NICs and the National Living Wage both hitting their own cost base and depressing demand from clients." The BoE, which cut interest rates this month, is closely watching service prices as it tries to gauge the strength of underlying inflation pressures in the economy and the appropriate pace of further rate reductions. The CBI's gauge of profitability expectations for the next quarter among business and professional services firms fell to -47% in the three months to May, the weakest reading since February 2020 and down from -36% in the previous quarter. Outside the pandemic, it was the lowest reading since November 2008. Investment intentions, business volumes, and hiring cooled. The survey was based on responses from 215 services firms collected between April 28 and May 14. ($1 = 0.7402 pounds)
Bloomberg
22-05-2025
- Business
- Bloomberg
India Economic Activity Retains Momentum in May, Flash PMIs Show
India's economic activity improved in May despite uncertainty over tariffs, led by a pickup in the services sector and steady showing by the manufacturing segment, a flash survey by HSBC Holdings Plc showed. The manufacturing purchasing managers' index was up slightly at 58.3 from 58.2 in April, while the services purchasing managers' index climbed to 61.2 from 58.7 last month. That helped the composite index jump to 61.2 compared to 59.7 in April.
RNZ News
19-05-2025
- Business
- RNZ News
Service sector index drops signalling soft economic recovery
The economically important services sector is struggling to get traction. Photo: The economically important services sector is struggling to get traction and weighing on the pace of recovery. The BNZ-Business New Zealand Performance of Services Index (PSI) fell 0.4 points to 48.5 in April from the month before. A reading below 50 means activity is slowing in a sector which accounts for about two-thirds of the economy and includes tourism, retail and hospitality. "The survey says the services sector is still going backwards. 48.5 is below 50.0 which is contraction, and indeed its three months in a row the service sector has been going backwards," BNZ senior economist Doug Steel said. The sub-indices were mostly negative compared to March. Sales were unchanged, but employment fell and deliveries slumped to their lowest level since September 2024. Only new orders bucked the trend, rising to the highest level in over a year. The level of negative comments in the survey rose once again, citing a combination of geopolitical and economic uncertainty, the cost of living, weak consumer and business confidence, and seasonal slowdowns. "For all the commentary around the economic recovery, the PSI is a good reminder that current conditions are extremely challenging. New Zealand's PSI remains weaker than all our key trading partners," Steel said. He said combined with last week's manufacturing survey , a picture emerges of an economy struggling to gather forward momentum, threatening growth forecasts . "It suggests that the central bank will continue easing. We think they'll cut by 25 basis points next week." Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
