US April Services PMI at 51.0, Misses Forecast as Growth Cools

U.S. services activity remained in expansion territory in April but fell short of market expectations, signaling slower growth and softer demand.

S&P Global's services Purchasing Managers' Index stood at 51.0 in April, slightly below the market forecast of 51.3, according to data cited by the cryptocurrency market on May 5. A reading above 50 indicates expansion, while a reading below 50 signals contraction.

The index remained in expansion territory, though the pace of growth slowed. Services activity rebounded from March, but growth momentum has weakened from the start of the year.

Chris Williamson, chief economist at S&P Global, said the services sector returned to growth after a slight contraction in March, but the pace of expansion has clearly slowed from earlier this year.

Current data suggest the economy is growing at an annualized rate of about 1%, he said. Slower growth is becoming more likely as new business declined for the first time in two years, partly due to the impact of the war in the Middle East.

Consumer-facing services were hit especially hard as high prices curbed spending on travel and leisure, Williamson added. Transportation was also affected by higher fuel costs and travel restrictions.

Demand for financial services is also declining. Market uncertainty, along with high prices and interest-rate expectations, is restraining real estate and lending activity.

Cost pressures are also building due to rising fuel prices and wages, which could feed into higher consumer prices. That, in turn, could increase pressure on the Federal Reserve to act against entrenched inflation.