The service sector held steady in April, yet signs that tariffs were having an impact on prices showed up in the data released by the Institute for Supply Management on Monday.
The top-line index rose to 51.6 from 50.8, while the prices paid subindex rose to 65.1 from 60.9.
Although the service sector should be less sensitive to tariffs on imported goods than the manufacturing sector, many service providers, especially small businesses, rely on imports.
While we did not see a major decline in April’s growth, the increase in prices paid to the highest level since early 2023 was not a good sign.
Together with the prior data on manufacturing prices also from the Institute for Supply Management, we should expect a much stronger consumer price index in April because of tariffs when the data is released on May 13.
Read more of RSM’s insights on the economy and the middle market.
April should mark the first month that consumers and businesses shifted their spending from pulling forward to pulling back because of tariffs.
Rising prices and falling demand are typically the recipe for a downturn in growth. It would not be a surprise if we see another quarter of declining gross domestic product in the second quarter.
