Reuters
The numbers: The Institute for Supply Management said its nonmanufacturing index fell to a four-month in April to a reading of 56.8%, down from 58.8% in March. The index has fallen three months in a row after hitting a cycle high in January.
Any reading above 50% indicates improving conditions. Economists polled by MarketWatch expected a reading of 58%.
A related gauge of the health of the services sectors, the IHS Markit U.S. services PMI, edged up to 54.6 from 54.
What happened: Respondents started talking about rising labor and product costs, even as they said the economy is still rolling along. The prices component edged up 0.3 points to 61.8%.
Employment and supplier delivery components fell.
The big picture: The U.S. economy is still in good shape — perhaps too good, as the concern over rising prices demonstrate. That’s why the Federal Reserve signaled Wednesday it was likely to keep lifting interest rates this year.
ISM said the April reading corresponds to a 2.9% increase in real gross domestic product on an annualized basis.
What they’re saying: “National shortage of Class-A drivers and the increased demand for logistics is resulting in an increase in the cost of goods,” said one manager in the accommodation and food services business.
“The trade tensions are impacting purchasing of steel and are causing suppliers to send letters of concern regarding contracted purchases for this year and the future based on these proposed tariffs,” said a manager in the construction industry.
Market reaction: Little, if any. U.S. stocks were struggling on Thursday, with the Dow Jones Industrial sliding over 180 points. The yield on the 10-year Treasury slipped slightly.