Because manufacturing is much less important to the economy than in the decades before the Millennium, the economically weighted average of the ISM services index (75%) as well as manufacturing (25%), especially over a three month period, has been much more accurate since 2000.

In April the important aspects of the services report reversed higher, as the headline number rose 0.8 to 51.6, and the more leading new orders reading rose 1.9 to 52.3. Recall that in these indexes 50 is the dividing line between expansion and contraction, so these are decent expansionary numbers.

Interestingly, this report is in sharp contrast to the regional Fed nonmanufacturing reports, which on average showed sharp contraction are declines.

Below are comparisons of the headline manufacturing and services indexes:

(Click on image to enlarge)

And for the manufacturing and services new orders indexes:

(Click on image to enlarge)

Here are the three months in the headline numbers (first line) and the three month average for services, plus the same as to the new orders services subindex (second line):

53.5, 50.8, 51.6 —> 52.0

52.2, 50.4, 52.3 —> 51.6 

Since the three month headline and new orders averages, respectively, in the manufacturing index were 49.3 and 47.0, this means the economically weighted average for the total index is 51.3, and for new orders is 50.5. This compares with the three month economically weighted averages of 51.8 and 50.9 for March.

In sum, despite this month’s rebound in services, the economically weighted services averages continue to show deceleration; while the manufacturing averages have resumed steady slight contraction after a spike from front-running tariffs. The headline total measure remains in weak expansion, while new orders for the entire economy are right on the cusp of tipping into contraction.

More By This Author:

April Jobs Report: Another Good Month, With Little Impact From “Liberation Day” Tariffs - Yet
March Construction Spending: Yet More Incipient Tariff Effects
April ISM Manufacturing Report Continues Showing Contraction