Implications:  No sign of a recession in April for the US service sector, as the ISM Services index beat consensus expectations and rose to 51.6, signaling continued expansion in the part that drives two-thirds of the US economy.  Looking at the details, April’s change in the indexes were a reversal of the movement in March, with most major measures of activity moving higher.  The index for new orders climbed to 52.3, with respondent comments noting a rising number of companies looking to increase sourcing and manufacturing in the US.  Meanwhile, business activity continued to expand in April but at a slower pace than March, with the index declining to 53.7.  Despite orders and business activity increasing, service companies have taken a cautious stance with their hiring efforts.  The employment index remained in contraction territory for the second month in a row, with an equal number of industries (eight) reporting higher employment versus lower employment in April.  Respondent comments reveal that impacts from cuts on federal government spending and grants are contributing to the hiring freeze among some service companies.  Finally, the highest reading of any category was once again the prices index which rose to 65.1 in April, with seventeen out of eighteen major industries reporting paying higher prices and just one reporting a decline (Arts, Entertainment & Recreation).  The prices index sits at the highest level since the beginning of 2023, but far from the worst during the years following the onset of COVID.  The Federal Reserve is unlikely to move at their meetings this week as it continues to watch how the economy responds to actions out of DC, but we believe the Fed is eyeing further rate cuts in the later part of 2025.   As for the economy, it’s true that tariffs and government spending cuts are impacting, but they have not induced a recession.  The service sector remains a lifeline for growth – for now.

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