The economy continues to strengthen as we move further along into the second quarter, and following the long and difficult winter that preceded it. To recap, after a minuscule 0.1% increase in the nation's gross domestic product in the first quarter, we have seen a solid increase in manufacturing activity in April, a step up in the leading indicators, gains in personal income and consumer spending, a much better-than-expected report on job creation and unemployment, and a strong rise in non-manufacturing activity in recent weeks.
It is this last metric, which was reported within the past hour that directly concerns us here. On point, the Institute for Supply Management, the Arizona-based trade group, has reported that its index on the non-manufacturing, or the services sector, jumped to 55.2 in April from 53.1 in March. An increase to 54.1 had been the forecast.
Contributing mightily to this nice increase (and to the report of further growth in the month) was strength in production, which soared above 60 last month, to a survey result of 60.9. (Note that a result higher than 50.0 suggests an expansion in this area; one below 50.0 signals a contraction.) Also helping the aggregate score increase to 55.2 last month were further gains in new orders (58.2 versus 53.4), inventories, prices, and exports.
Restraining this advance were lesser rates of growth in employment and supplier deliveries. It should be noted that only backlogs, which fell from 51.5 to 49.0, showed a contraction.
Looking at the last year as a whole, we learned that the latest result of 55.2 was between the 12-month high of 57.9 (reached last August) and the 12-month low of 51.6 (tallied in February of this year). The 12-month average was 54.3, or just below the score for April, and nominally above the 54.1 expectation.
As to what respondents are seeing, we find that 14 of the 18 industries reporting showed growth in April, among them arts, entertainment, and recreation. As to those interviewed, comments such as our outlook for 2014 remains on target and general business conditions are improving.
Taking all of this in, we find that this report made excellent reading and also marked the 52nd straight month, a span of more than four years, which this index was above 50.0. The durability of the business expansion, which seemed in some question just weeks ago, seems to no longer be open to discussion.
At the time of this article's writing, the author did not have positions in any of the companies mentioned.