US services firms grew in April at slowest pace this year

FILE- In this March 30, 2018, file photo, Adam Lange pours water while making coffee at a Philz Coffee shop in San Francisco. On Thursday, May 3 The Institute for Supply Management, a trade group of purchasing managers, issues its index of non-manufacturing activity for April. (AP Photo/Jeff Chiu, File)

WASHINGTON — U.S. services firms grew at a slower pace in April compared to the prior month, as companies are reporting cost pressures from possible tariffs and a shortage of available workers.

The Institute for Supply Management said Thursday that its services index fell to 56.8, from 58.8 in March. This marked the lowest reading of the index this year. Still, any reading above 50 is a sign of expansion. The services sector has been expanding for the past 99 months, or more than eight years.

The index is drawn from a survey of purchasing managers in the services industry, which includes finance, health care and retail and accounts for the majority of U.S. economic activity. Multiple companies said there is a lack of workers, specifically in the trucking and construction sectors. Other companies noted that the tariffs proposed by President Donald Trump appear to be driving prices higher.

"There is some inflation creeping in — It's not very sharp," said Anthony Nieves, who chairs the ISM's non-manufacturing business survey committee.

The outlook was generally positive about the economy continuing to expand. All 18 industries surveyed for the index said they were expanding. One management firm quoted in the report saying that the tax cuts Trump signed into law were helping.

The employment and production components of the index decreased in April, although both pointed to continued growth. New orders rose last month in a sign that companies are seeing solid demand.

The U.S. economy appears to be grappling with the possibility of inflation rising slightly even as the pace of growth remains relatively healthy. Friday's employment report from the government is expected to show that employers added a solid 190,000 jobs in April, according to a survey by data provider FactSet.

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