The Institute for Supply Management's non-manufacturing PMI dropped to 49.4 in April, dipping from 51.4 in March. The expectation was for the index to increase to 52.0. A PMI reading below 50 signals a contraction in the service economy. It was the lowest non-manufacturing PMI reading since December 2022. Services account for more than two-thirds of U.S. economic activity. An index measuring new orders for service businesses dipped to 52.2 in April, falling from a March reading of 54.4.
After the Federal Reserve FOMC meeting last week, Fed Chair Jerome Powell insisted there were no signs of stagflation. “I don't really understand where concerns about stagflation are coming from. I don’t see the stag or the 'flation.” You can certainly argue that the economic picture is nothing like the stagflationary years of the 1970s. But the warning signs are clearly there - as evidenced by the services PMI report and other recent economic data.