Washington, Activity in the US services sector cooled in April, survey data showed Tuesday, as steeper energy costs from war in the Middle East filter through the global economy.
The Institute for Supply Management’s (ISM) services index came in at 53.6 percent last month, down 0.4 percentage points from March’s figure.
While business activity ticked up, the new orders index pulled back from the prior month’s reading.
Meanwhile, the employment index contracted for a second month in a row.
“The prices index held steady at 70.7 percent in April, the same as March’s figure and repeating its highest reading since October 2022,” said ISM survey chair Steve Miller.
“Diesel, gasoline, oil and related price increases were the most frequently mentioned commodities up in price in April,” he added in a statement.
Energy costs have surged since US-Israeli strikes on Iran from February 28 that prompted Tehran’s retaliation in blocking off the Strait of Hormuz.
The narrow waterway is a critical route for energy shipments, and oil prices have jumped by more than 60 percent since mid-February.
“We expect to see continued elevated readings for the prices index for several months — regardless of when the conflict in Iran ends — due to these costs working their ways through global supply chains,” Miller said.
A survey respondent in the construction sector said that although the spring selling season for the homebuilding market is here, “interest rates, inflation, and oil supply issues are keeping buyers on the fence.”
“Discounts and rate buy-downs remain the driver of sales, as affordability continues to be the hinderance for buyers,” the respondent warned.
