A report released by the Institute for Supply Management on Tuesday showed U.S. service sector activity contracted for the first time since December of 2009 in the month of April.
The ISM said its non-manufacturing index tumbled to 41.8 in April from 52.5 in March, with a reading below 50 indicating a contraction in service sector activity.
The non-manufacturing index slumped to its lowest level since hitting 40.1 in March of 2009 but still came in above economist estimates for a reading of 36.8.
A note from economists at Oxford Economics pointed out the index would have fallen even further were it not for a record rise in the supplier deliveries index caused by supply chain disruptions.
The report said the supplier deliveries index spiked to a record high 78.3 in April from 62.1 in March, with a reading above 50 indicating slower deliveries.
“Non-manufacturing conditions overall are dire as business activity and employment both plunged to record lows while new orders indicate sparse activity in the pipeline,” said the economists at Oxford Economics.
The steep drop by the headline index came as the business activity index plummeted to 26.0 in April from 48.0 in March and the new orders index plunged to 32.9 from 52.9.
The employment index also showed a nosedive to 30.0 in April from 47.0 in March, indicating employment in the service sector contracted for the second month in a row.
On the other hand, the report said the prices index rose to 55.1 in April from 50.0 in March, suggesting prices increased after coming in unchanged in the previous month.
The ISM released a separate report last Friday showing U.S. manufacturing activity continued to contract in the month of April.
The report said the purchasing managers index slumped to 41.5 in April from 49.1 in March, with a reading below 50 indicating a contraction in manufacturing activity.
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