The figures: The Institute for Supply Management said on Friday that the PMI for the service sector fell precipitously from 51.4% in March to 49.4% in April.
The ISM index was predicted by Wall Street Journal economists to tack on another percentage point, to 52%. Values less than 50% signify a downturn in the economy.
Since December 2022, the non-manufacturing index has been higher than 50%.
Important information: In April, the new-orders index dropped by 2.2 percentage points to 52.2%.
At 45.9%, the employment index decreased by 2.6 percentage points.
At 59.2%, prices increased by 5.8 percentage points.
Overall: Despite rising interest rates, the economy has been firmly supported by the service sector. The unexpected drop might be the beginning of a downturn. Given the negative news, it could strengthen the case for a rate cut by the Federal Reserve.
According to the ISM, “respondents to the survey indicated that overall business is generally slowing down.” The main causes of employment issues are still finding backfills for open positions and/or managing labour costs, according to Anthony Nieves, chair of the ISM services survey committee.
Reaction from the market: Following the alleviation of wage pressure indicated by the April jobs report, the DJIA SPX saw higher prices on Friday. In early trading, the yield on the 10-year Treasury bond, BX:TMUBMUSD10Y, dropped to 4.503%.