Tom Moeller

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The Mortgage Bankers Association's Loan Applications Index weakened 2.3% (-53.7% y/y) in the week ended May 27 after declining 1.2% in the prior week. Applications to refinance an existing loan continued to lead the decline with 5.4% drop (-75.1% y/y) after falling 3.9% in the week earlier. Applications for purchase eased 0.6% (-14.3% y/y) after rising 0.2% in the prior week.

The share of applications for refinancing fell to 31.5% in the week ended May 27, half the percentage in December 2021 and nearly the lowest reading since December 2000. The percentage that were ARMs fell to 8.7%

Applications for fixed-rate loans fell 1.5% (-56.1% y/y) in the week ended May 27. Meanwhile, applications for adjustable-rate mortgages fell 10.1% (+8.0% y/y).

The effective rate on 30-year fixed-rate loans fell to 5.48% last from 5.64% in the prior week. It remained near the highest reading since June 2009. The rate for 15-year fixed mortgages slipped to 4.75% and for 30-year Jumbos slipped to 5.05%. The rate on 5-year ARMs was little-changed w/w at 4.71%, up from 2.57% at the end of last year.

The average loan size of $385,600 was down sharply from $401,900 at the beginning of the month. The average size of a purchase loan rose slightly to $433,200. The average refinancing loan size was $282,100.

This survey covers over 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks, and thrifts. The base period and value for all indexes is March 16, 1990=100.

These figures for weekly mortgage applications and interest rates are available in Haver's **SURVEYS** database.

- Loan refinancing continues to fall sharply.
- Purchase applications slip.
- Interest rates ease.

U.S. Mortgage Applications Decline Further

Carol Stone, CBE

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Job openings fell 455,000 in April to 11.400 million (-3.8% m/m, +23.0% y/y), but that followed an increase of 511,000 in March which produced an all-time high of 11.855 million. These data, collected and published by the Bureau of Labor Statistics, begin in December 2000. The job openings rate, 7.0% in April, is calculated as job openings as a percentage of the sum of establishment employment plus openings. Its highest value ever was 7.3% in March; the rate first reached 7.0% in October 2021, so this shows that the labor market has been quite strong in recent months.

New hires decreased 59,000 in April (-0.9% m/m, +7.6% y/y) after declining 187,000 (-2.7% m/m in March. The March and April declines follow a surge of 406,000 in February, +6.3% m/m. The hiring rate was 4.4% in April, the same as in March and down from 4.5% in February.

The total number of job separations was 6.033 million in April (-3.4% m/m, +4.9% y/y). There were 4.424 million quits (-0.6% m/m and +10.2% y/y), following 4.449 million in March. The quits rate was 2.9% in April, the same as in March and February. Layoffs and discharges were 1.246 million in April (-12.0% m/m and -10.0% y/y), down from 1.416 in March and the smallest amount ever in these data, which began in December 2000. "Other separations" were 363,000 in April (-5.5% m/m and +2.5% y/y); the April amount is down from 384,000 in March and close to the historical average for this category, 347,000.

Private-sector job openings fell 3.9% m/m (+25.1% y/y) in April, to 10.392 million, with the private-sector job openings rate at 7.0%, down from 7.3% in March.

Among select industries, openings in manufacturing had the biggest increase in April, 119,000 (+13.6% m/m and 15.1% y/y). Construction job openings also increased, reaching 449,000 (+5.4% m/m and +36.5% y/y) in April after 426,000 in March. The April amount was a record number of openings for the construction sector. Professional and business services had 2.181 million job openings at the end of April, down 6.4% m/m but up 31.4% y/y. Government sector job openings were 1.008 million at the end of April, down 3.4% m/m and up 5.4% y/y.

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Total separations in the private sector were 5.658 million in April, down 3.2% m/m but up 4.1% y/y. The private sector quits rate was 3.2%, down slightly from 3.3% in March.

Layoffs and discharges are involuntary separations initiated by the employer. In the private sector, these were 1.178 million in April, down from 1.333 million in March. The layoff and discharge rate in April was 0.9%, down from 1.0% in March and the lowest ever. Among various industries, layoffs and discharges were 295,000 in professional and business services, less that the 428,000 in March; the April amount was a rate of 1.3%, lower than the 1.9% in March. In leisure and hospitality, they were 186,000, a rate of 1.2%. In manufacturing, there were 105,000 layoffs and discharges, a rate of 0.8%, the same as both February and March. In construction, there were 115,000 layoffs and discharges, representing a rate of 1.5%.

The Job Openings and Labor Turnover Survey (JOLTS) are available in Haver's **USECON** database.

- The number of job openings falls 455,000 in April, but still historically very large.
- New hires also ease, but remain sizable.
- Quits and layoffs decrease.

U.S. JOLTS: April Job Openings Ease Slightly from All-Time High

Sandy Batten

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**Retail gasoline prices** increased to $4.62 per gallon (+52.8% y/y) in the week ended May 30, another series high dating back to 1990, from $4.59 per gallon in the previous week. Haver Analytics adjusts the gasoline price series for normal seasonal variation. The seasonally adjusted price edged up one cent to $4.53 per gallon, also a series high.

The price of **West Texas Intermediate crude oil** edged up further to $112.47 per barrel (+69.5% y/y) in the week ended May 27 after having surged to $112.16 in the previous week. This compares to a recent high of $113.33 averaged in the fourth week of March. Yesterday, the price was $114.67 per barrel. The average price of **Brent crude** oil increased to $115.19 per barrel (+68.3% y/y) from $111.76 per barrel in the prior week. It was the highest price since the end of March. The price rose to $118.13 per barrel yesterday.

The price of **natural gas** continued to rise in the week ended May 27, increasing to $8.79/mmbtu (+207.3% y/y) from $8.21/mmbtu in the previous week. The price has risen from a recent low of $1.52/mmbtu averaged in the third week of June 2020 and is up 147% since the beginning of this year. Yesterday, the price was $8.46/mmbtu.

In the four weeks ended May 20, **gasoline demand** fell 2.7% y/y. By contrast, demand for **all petroleum products** rose 2.1% y/y. **Crude oil input to refineries** increased 4.5% y/y.

**Gasoline inventories** decreased 5.5% y/y in the week of May 20 while **crude oil inventories** declined 14.5% y/y.

The **supply of gasoline** inventories in the week ended May 20 edged down to 24.8 days from 24.9 days in the previous week. The **supply of crude oil** slipped to 26.5 days from 26.8 days.

These data are reported by the Energy Information Administration of the U.S. Department of Energy. The price data can be found in Haver's **WEEKLY**and **DAILY** databases. Greater detail on prices, as well as the demand, production and inventory data are in **USENERGY.**

- Gasoline prices rose further to another series high.
- Crude oil prices increased on top of previous week's surge.
- Apart from one-week spike during the Texas freeze in 2021, natural gas prices rose to highest level since August 2008.

U.S. Energy Prices Are Still Rising

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The Autodata Corporation reported that light vehicle sales during May declined 12.2% to 12.81 million units (SAAR). Sales were off by roughly one-quarter y/y and were one-third below the April 2021 peak. Vehicle sales comprise roughly four percent of real consumer expenditures.

Sales of light trucks led last month’s decline by falling 12.4% (-23.0% y/y) to the lowest level this year. Purchases of domestically-produced light trucks weakened 11.0% last month (-19.7% y/y) to 7.95 million units. Sales of imported light trucks declined 17.4% to 2.09 million units and were off by one-third y/y.

Trucks' share of the light vehicle market was little-changed at 78.4% in May but down from the 80.4% share six months earlier.

Auto sales weakened 11.5%, off by one third y/y, to 2.77 million units. Purchases of domestically-made autos fell 13.2% in May to 1.90 million units, off by one-quarter y/y. Sales of imported autos fell 6.5% (-41.6% y/y) to 0.87 million units.

Imports' total share of the U.S. vehicle market eased m/m to 23.1% and remained below February's 25.4% share. Imports' share of the passenger car market rose to nearly one-third, but remained down from the September 2021 high of 38.1%. Imports' share of the light truck market eased to 20.8%.

U.S. vehicle sales figures can be found in Haver's **USECON** database. Additional detail by manufacturer is in the **INDUSTRY** database.

The Fed's latest **Beige Book** covering regional economic conditions is available [here](https://www.federalreserve.gov/monetarypolicy/files/BeigeBook%5F20220601.pdf).

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- Both auto & light truck sales weaken.
- Sales remain constrained as parts shortages limit dealer inventory.
- Imports' share eases to six-month low.

U.S. Light Vehicle Sales Fall Sharply in May

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

Our global data offering is unparalleled in terms of coverage, quality, and organization. We offer 290+ databases from 2500 government and private sources, a wealth of key survey and forecast data covering the world’s economies, and a robust offering of archive databases that drive machine learning for big data applications.

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The U.S. trade deficit in goods and services (BOP basis) in March grew to $140.5 billion after narrowing slightly to $123.2 billion in February, revised from $122.7 billion, after widening to $130.7 billion in January according to the U.S. Census Bureau. A $136.7 billion deficit was expected by the Action Economics Forecast Survey. Exports rose 0.2% (6.7% y/y) in March after increasing 2.8% in February. This was accompanied by a 4.4% rise (27.1% y/y) rise in imports which came after m/m stability in February. In Q1’25, the deficit grew to an average $131.4 billion, after rising to an average $83.3 billion in Q4’24.

The trade deficit in goods (BOP basis) widened to a record $163.2 billion in March from $147.9	 billion in February, revised from $147.0 billion. Goods exports (customs value) rose 1.4% (7.0% y/y) in March, after increasing 3.6% in February. The latest increase reflected an 8.2% (8.4% y/y) surge in auto exports which came after a 12.7% strengthening. A 3.5% (4.0% y/y) gain occurred in industrial supplies & materials exports which followed a 5.1% rise. Foods, feeds & beverage exports rose 6.6% (1.4% y/y) after declining in four of the prior five month. Working lower, capital goods exports fell 2.5% (+13.9% y/y) in March after a 4.	8% increase and nonauto consumer goods exports were off 1.1% (+3.4% y/y) in March after a 2.4% gain.

Imports of goods increased 5.5% (31.4% y/y) in March after a 0.2% February easing. Imports of nonauto consumer goods imports surged 27.9% (56.0% y/y) following a 3.1% February gain. Auto imports rose 6.6% (8.7% y/y) after a 1.2% rise. Capital goods imports rose 4.2% (22.5% y/y) following a 1.1% rise. Foods, feeds & beverage imports eased 0.4% (+11.1% y/y) following a 2.0% weakening. Industrial supplies & materials imports declined 12.4% (+39.5% y/y) after weakening 4.6% in February. Petroleum imports by end-use fell 4.1% (-10.2% y/y) after a 2.9% decline. Nonpetroleum imports increased 6.0% (34.8% y/y) after holding steady in February.

The inflation-adjusted goods trade deficit (customs value) deepened to $150.9 billion in March from $136.9 billion in February. Real exports rose 1.6% (5.3% y/y) after a 3.0% February increase, while real imports rose 5.8% (29.8% y/y) in March following a 0.5% February slip.

The services trade surplus narrowed to $23.0 billion in March after decreasing to $23.8 billion in February. It reached a peak of $25.7 billion in November of last year. Service exports fell 0.9% (+5.7% y/y) after a 0.8% decline in February. Construction services exports rose 1.0% (37.7% y/y) after increasing 2.6% in February. Travel services exports fell 7.1% (-3.7% y/y) and financial exports increased 0.9% (7.3% y/y). Transport exports rose 3.1% (2.4% y/y). Service imports eased 0.1% (+10.8% y/y) in March following a 0.8% gain. Maintenance & repair services declined 1.5% (+32.1% y/y) while imported transport services increased 1.2% (1.7% y/y). Imported travel services fell 2.2% (5.3% y/y) while charges for use of intellectual property rose 1.0% (13.6 y/y).

The U.S. goods trade deficit with China narrowed to a seasonally adjusted $24.8 billion in March from $26.6 billion in February. Exports to China declined 8.2% (-10.5% y/y) while imports weakened 7.2% (-2.7% y/y). The deficit with the European Union deepened to a record $48.3 billion in March from $30.9 billion in February. Exports rose 10.9% (14.5% y/y) while imports soared 34.0% (65.4% y/y). The deficit with Japan deepened to $5.8 billion from $5.2 billion in February. Exports rose 1.8% (8.8% y/y) and imports rose 6.4% (9.9% y/y).

The international trade data, including relevant data on oil prices, can be found in Haver’s **USECON** database. Detailed figures on international trade are available in the **USINT** and **USTRADE** databases. The expectations figures are from the Action Economics Forecast Survey in **AS1REPNA**.

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- Goods deficit grows as imports surge ahead of tariff imposition.
- Exports edge higher, led by autos.
- Petroleum product imports fall as crude oil prices decline.

U.S. Trade Deficit Deepens to Record in March

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Retail gasoline prices for all grades improved to an average $3.27 per gallon (-13.1% y/y) in the week ended May 5 and reversed the prior week’s easing to $3.26. Prices were $3.37 per gallon to begin the month but remained above their low of $3.13 in the week of December 9. An earlier high was $3.79 in the week ending April 22, 2024. The all-time high of $5.11 occurred in the week ending June 13, 2022. The retail price for on-highway diesel fuel eaed to $3.50 per gallon (-10.2% y/y) in the week of May 5 from $3.51 in the prior week. The latest diesel price stood well below a high of $4.63 in the week ending September 18, 2023 and a peak of $5.81 in the week ending June 20, 2022.

The price of West Texas Intermediate crude oil declined to $59.64 per barrel (-26.4% y/y) in the week ended May 2, after rising to $63.09 per barrel in the prior week. Prices remained below a high of $91.45 in the week of September 29, 2023. The cost of crude oil peaked at $120.46 in the week of June 10, 2022. Yesterday, the price was $57.13 per barrel. The price of European Brent crude oil declined to $63.50 per barrel (-25.9% y/y) in the week of May 2 from $67.92 in the previous week. Prices remained well below a recent high of $95.61 in the week of September 29, 2023 and compared to a peak of $127.40 in the week of June 10, 2022.

Natural gas prices improved to an average $3.09 per mmbtu (+88.4% y/y) in the week ended May 2, after falling to $3.00/mmbtu in the prior week. Prices remained well above a low of $1.40/mmbtu in the week of March 15, 2024 but below their peak of $9.56 in the week of August 26, 2022. Yesterday’s price was $3.26/mmbtu.

Gasoline demand rose 3.2% y/y in the four weeks ending April 25 following a 0.4% y/y decline in the prior four weeks. Demand for all petroleum products improved 0.3% y/y in the four weeks ending April 25 after a 0.4% y/y rise in the previous four-week period. Crude oil input to refineries eased 0.1% y/y in the four weeks ending April 25 after a 1.3% y/y decline in the prior four weeks.

Gasoline inventories slipped 0.7% y/y in the week ending April 25 after a 1.2% y/y rise in the week ending April 18. Residual fuel oil inventories fell 18.7% y/y in the week of April 25, after a 19.0% y/y fall in the prior week. Crude oil inventories rose 1.4% y/y in the week of April 25 after a 2.6% y/y rise in the previous week.

Measured in days’ supply, gasoline inventories fell w/w to 25.5 days in the week of April 25 from 26.4 days in the prior. The recent low was 22.9 days in the week of November 8. The supply of crude oil eased w/w to 27.9 days in the week of April 25 after three weeks at 28.3 days, and remained below a high of 31.9 days in the week of March 3, 2023.

These data are reported by the Energy Information Administration of the U.S. Department of Energy. The price and supply/demand data can be found in Haver’s **WEEKLY** & **USENERGY** database.

- Gasoline prices edge higher.
- Crude oil prices decline.
- Natural gas costs rise.

U.S. Energy Prices Remain Mixed in Latest Week

Robert Brusca

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Not many respondents are showing absolute slowing. Only five this month. Only six over the last three-months on average. The median total PMI score fell to 49.7 showing contraction in April from 51.1 in March. The average fared slightly better. The 12-months to 6-months to 3-months shows a moderate but consistent slowing. The breadth of slowing is wide with 60.9% of survey respondents slowing over 3-months compared to six months.

The percentile standings show the most strength for the BRIC group with reading above 50% (that marks the median). All other groupings have standings below the 50%, mark indicating that they are below their respective medians of the last four-plus years.

Over every horizon from 12-month to 6-month to 3-month, more than 50% of the respondents show a weakening (slowing) in their PMI responses.

Among the largest economies only Italy has a composite PMI standing above its median (above 50%).

Only 9 of 24 respondents have PMI ranked percentile standings above the 50% mark. That underlines the weakness in composite conditions and the breadth of the weakness.
 
Services sectors no longer are providing the lift to offset ongoing weakness in manufacturing. The differences among countries are narrowing.

Economic conditions across countries may be narrowing for several reasons, one being that the COVID period and then the shock reaction to Russia's invasion from Ukraine put all countries on the same timeline as central banks have been leaning against the shockwaves from those 2 events. As a result of those events, inflation flared but has more recently been falling. Still, inflation continues to be over the top of targets with the European Monetary Union right now making the most progress and Japan facing more late cycle weakness with excessive inflation than other countries in the mix.  More recently aggressive tariff policy the United States has put all countries on their back foot and puts everyone on notice that the future has become a lot more uncertain. Central banks that were progressing toward rate cuts now are worried about the possibility of more inflation from tariffs or from the possibility of recession from tariffs - tariffs up the ante on uncertainty as well as on risk.  What we see in this month's PMI statistics is a gradual continued erosion as the perceived risk here is that things get steadily but slowly worse as firms, investors, and consumers began to pull in their horns and prepare for something bad to happen not knowing what that might be.

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Global Composite PMIs Erode

Tian Yong Woon

This week, we focus on trade developments between the US and major Asian economies. Early indications coming out of US-India trade talks seem encouraging, with terms such as “forward most-favoured-nation” for the US and “zero-for-zero” tariffs appearing in news reports — terms which, if enacted, would represent a significant win for the US. India stands to benefit greatly as well if key exports to the US, such as pharmaceuticals (chart 1), receive substantial tariff relief. The benefits could be strongly mutual if a deal also grants the US greater access to India’s large auto consumer market, particularly for major US electric vehicle (EV) producers, given that EV adoption in India remains at a very early stage (chart 2).

Turning to South Korea, discussions also appear to be progressing at a healthy pace, although details remain limited and ongoing domestic political challenges continue to hinder substantive breakthroughs. Nonetheless, the South Korean won has shown signs of stabilisation, while local equity markets have remained buoyant (chart 3). Recent trade data for April has also provided some investor relief, as weak exports to the US were more than offset by a strong performance in semiconductor shipments (chart 4).

In Japan, the race to secure a trade deal with the US is well underway, with automotive exports expected to be a key focal point given their significance to Japan’s economy and the US being a major export destination (chart 5). China, however, remains a notable outlier, with formal trade talks with the US not yet underway. Still, the US-China trade relationship continues to be the most closely watched, given its scale and potential impact on global growth and trade dynamics. While markets await China’s official April trade data, early indicators such as port activity already suggest a decline in bilateral trade flows (chart 6).

**US-India trade talks**
US-India trade discussions have reportedly been progressing rapidly, with both sides having already finalized in April the terms of reference for talks, setting the stage for formal negotiations. One early sign of favourable momentum is India’s possible offering of a “forward most-favoured-nation” clause to the US. This would ensure the US always receives the most favourable tariff terms, ahead of any other trade partner. If enacted, this would be a significant win for the US and a major leap forward in the US-India trade relationship. Another reported breakthrough involves India’s reported proposal of “zero-for-zero” tariffs on steel, auto components, and pharmaceuticals—offered on a reciprocal basis up to a certain quantity. If agreed, this would be mutually beneficial, especially as pharmaceuticals remain one of the US economy’s key imports from India, as shown in chart 1. On a separate note, and more recently, India’s phone exports to the US have reportedly gained prominence. With steep US tariffs on China, firms like Apple are increasingly incentivised to accelerate production shifts to India.

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Additionally, India’s proposed “zero-for-zero” tariff plan for auto parts may galvanise US access to India’s large domestic auto market, which has remained comparatively insulated due to high import tariffs. Another area to watch in the trade talks is electric vehicle (EV) imports, especially given US EV giant Tesla’s continued interest in expanding into the Indian market. That said, EV adoption in India remains in its early stages by many measures. While India has an immense middle class with future sales potential, EVs accounted for only about 2% of new cars sold in 2023, as shown in chart 2. This is well below levels seen in other Asian economies like China, or leaders in this space like Norway, where nearly all new cars sold are EVs. Challenges remain in unlocking the domestic Indian market—particularly around affordability and the underdeveloped state of EV infrastructure.

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**US-South Korea trade talks**
Discussions on the US-South Korea trade front also appear to be progressing at a steady pace, with technical talks reportedly having concluded in Washington last week. However, details remain limited, and full-scale negotiations have not yet begun. Complicating matters is South Korea’s domestic political landscape. With the country heading into a snap presidential election on June 3, Vice Industry Minister Park has said there is no chance of a comprehensive deal being reached before then. Still, both sides have committed to working toward an agreement before the expiration of Trump’s 90-day reciprocal tariff pause on July 8. In financial markets, the won continues to swing but remains above its year-to-date lows (chart 3). Meanwhile, South Korean equities have been lifted by a softening in trade rhetoric from both the US and China, as well as optimism around the US-South Korea talks.

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Turning to the hard trade data, South Korea’s more complete April numbers offered some initial relief to investors. The economy still managed to post moderate export growth, surprising many, despite a nearly 7% y/y decline in exports to the US, as shown in chart 4. One of the key drivers was semiconductors, which recorded double-digit y/y growth for the second consecutive month. However, these figures likely do not yet reflect the full initial impact of the steep mutual tariffs between the US and China. Firmer indications may emerge in the coming months. By then, though, attention will likely have shifted toward the outcome of US trade talks with key partners, as the end of its 90-day reciprocal tariff pause draws near.

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**US-Japan trade talks**
Turning to Japan, there is a sense of cautious optimism, with Japan’s chief trade negotiator Akazawa expressing hope for a US-Japan trade deal by June, following the second and most recent round of talks held in Washington last week. A key point of interest is whether Japan can negotiate an exemption from the current 25% automotive tariffs imposed by the US. This is especially significant given the importance of the US as a destination for Japanese auto exports, as shown in chart 5, and the central role the sector plays in Japan’s broader manufacturing economy. Also worth noting is a recent clarification by Japan’s Finance Minister Kato, who walked back earlier remarks and stated that Japan will not use the sale of US Treasuries as a bargaining tool. The clarification may help defuse a potential point of friction between the two sides as trade discussions continue.

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**US-China trade developments**
Turning to US-China trade developments — while progress here has lagged, this relationship remains the most closely watched, given its potentially large impact if meaningful movement occurs. Recent messaging from both sides has softened, stepping back from the fiery exchanges and tariff escalations seen earlier in April, offering some interim relief for investors. China has reportedly exempted certain US imports from tariffs, including specific pharmaceutical and industrial chemical products. However, on US-China trade talks, they remain at a very early stage, with China merely “evaluating” the prospect of negotiations with the US. This suggests we are still far from anything resembling a formal deal. Investors are now closely watching for first-round effects of US tariffs, which are expected to appear in China’s April trade numbers due later this week. Early signs point to a slowdown. For example, vessel traffic at the Los Angeles–Long Beach port remains at range lows, hinting at reduced shipments from China.

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Asia

Economic Letter from Asia: Art of the Deal

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The U.S. ISM Services PMI rose to 51.6 during April, after falling sharply to 50.8 in March from 53.5 in February, according to today’s report by the Institute for Supply Management. The reading indicated service sector expansion for the tenth consecutive month, although the rate of expansion has slowed significantly. The index hit a recent high of 55.8 in October of last year and remains below the all-time high of 67.5 in November 2021. The Action Economics Forecast Survey expected 50.2 for April.

Haver Analytics constructs a composite index combining the services index and the manufacturing index released on Thursday. This index rose to 51.2 in Apri from 50.6 in March. The latest figure remains above its June low of 49.1.

Amongst the services component series, the employment index led last month’s improvement in the overall index. It rose to 49.0 after falling sharply to 46.2 in March. Higher employment was reported by a slightly improved 14.6% (NSA) of respondents while a lessened 16.4% reported a decline. The new orders index rose to 52.3 after falling to 50.4 in March. A higher 22.4% (NSA) of respondents reported a rise in orders while a lessened 15.3% reported a decline. Reporting slower delivery speeds, the supplier delivery series edged up to 51.3 in April after falling to 50.6 in March. Working lower, the business activity series declined to 53.7 after rising to 55.9 in March. A higher 26.2% (NSA) of respondents reported improved activity while a lessened 14.0% reported deterioration.

On the inflation front, the prices index surged to 68.9 in April after easing to 62.8 in March. A greatly increased 39.6% (NSA) of respondents reported higher prices while a lessened 1.9% reported lower prices. The index was increased from its December 2022 low 53.1 and stood at its highest level since October 2022.

Additionally, the new export orders index increased to 48.6 (NSA) in April following a decline to 45.8 in March from 52.1 in February. Just 14.8% of survey respondents reported higher exports while an increased 17.7% reported a decline. The imports index plummeted to 44.3 last month from 52.6 in March. A greatly lessened 4.7% of respondents reported higher imports while a doubled 16.2% reported a decline. The inventory change index jumped to 53.4, a six-month high. The order backlog index edged up to 48.0 in April after falling sharply to 47.4 in March. A lessened 12.2% of respondents reported higher backlogs while a fewer 16.2% reported a decline. These series are not seasonally adjusted and not included in the ISM Services PMI total.

The ISM Services PMI is a composite index consisting of four equally weighted diffusion indexes: Business Activity, New Orders, Employment, and Supplier Deliveries. A reading above 50 indicates expansion in the services sector, while below 50 suggests	 contraction. Supplier Deliveries is the only ISM index that is inversed; a reading above 50 indicates slower deliveries. The ISM figures are available in Haver's **USECON** database, with additional detail in the **SURVEYS** database. The expectations figure from Action Economics is in the **AS1REPNA** database.

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- Total index remains near nine-month low.
- Employment, new orders & supplier deliveries edge up. Business activity weakens. 
- Prices Index strengthens to roughly two-year high.

U.S. ISM Services PMI Edges Higher in April; Prices Strengthen

Economy in Brief: June 2022

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