Services gains point to global economic pickup despite Covid-19 flare-ups
Summary
- Services companies in the US, for instance, said in purchasing managers’ surveys that they saw strong activity last month as local economies further eased limits on businesses and more Americans received vaccinations
Service-sector activity continued to revive in the U.S. and elsewhere during April, including parts of the world such as India and Europe where extensive restrictions remain in place to contain Covid-19.
The resilience of services businesses underpins hopes that 2021 will see a strong rebound in global economic activity, as vaccination programs reach a larger share of the world’s population, albeit at very different rates in developed and developing economies.
Services companies in the U.S., for instance, said in purchasing managers’ surveys that they saw strong activity last month as local economies further eased limits on businesses and more Americans received vaccinations.
India is experiencing a devastating Covid-19 surge that has shattered global records for new cases. The country of about 1.3 billion people has seen infections rise by more than 1 million in the past week alone, bringing its total number of cases since the start of the pandemic to more than 18 million.
The worst-hit Indian states have responded by imposing new restrictions on households and businesses. Nonetheless, a survey of purchasing managers released Wednesday indicated that activity in India’s services sector slowed during April, but didn’t decline. That marks a contrast with more extensive lockdowns a year earlier, when India saw one of the world’s sharpest declines in services activity. It also marks a contrast with Brazil, which is suffering a surge in new infections and saw its services sector contract even more sharply in April.
When combined with a similar survey of manufacturers out Monday, the survey suggests the Indian economy may still be growing, although further restrictions that may have a larger impact on economic activity are likely.
“There is every possibility of a further tightening in state-level restrictions beyond this month," said Darren Aw, an economist at Capital Economics. “That would weigh heavily on services activity in particular, while the hit to incomes and need for social distancing will more broadly weigh on demand."
Europe’s services sector has been among the hardest hit by the pandemic, but there are signs that in some countries, activity has started to pick up. A survey of Spanish purchasing managers recorded the first rise in activity since July, reflecting preparations for an expected relaxation in restrictions as the vaccination program progresses.
Service providers reported that they were hiring additional workers for the first time since the pandemic struck.
“Confidence among firms and clients of a strong uplift in economic activity once vaccination programs take hold is growing," said Paul Smith, an economist at IHS Markit.
French service providers also reported a return to growth, in their case for the first time since August. But as elsewhere, activity in hotels and restaurants—the businesses that have been among the hardest hit by the pandemic—continued to decline.
The lifting of restrictions on the hospitality and tourism sectors as vaccination programs reach the majority of European adults is expected to drive a strong recovery in the economy during the second half of the year.
However, some economies have yet to see a pickup in the services sector. Activity in Italy’s services sector declined more sharply in April than in March, while in Germany, activity fell back again, having expanded in March.
That is a key reason why the eurozone’s economy has lagged the U.S. over the six months through March, and is likely to do so again this quarter.
A survey of U.S. services purchasing managers from IHS Markit showed that activity in the sector grew last month at its sharpest pace since late 2009, propelled by a rise in new orders and export sales. The survey also found that services businesses in April were optimistic about the outlook for the next year and expanded their workforces amid increased capacity demands.
Economists surveyed by The Wall Street Journal expect government data due out Friday to show that the U.S. economy added 1 million jobs in April. That would follow a robust addition of 916,000 jobs the previous month. Service-sector businesses have been boosting hiring as the economy more fully opens and consumers dole out more at establishments such as restaurants and hotels.
Consumer confidence has climbed in 2021, amid the widespread rollout of Covid-19 vaccinations and as federal stimulus measures, including direct cash payments, have reached households.
A similar survey of U.S. services purchasing managers from data provider the Institute for Supply Management showed that activity grew in April, albeit at a slower pace than in March.
Anthony Nieves, chair of the ISM survey, said that the slowdown in April partially reflected a pullback from very strong activity in March.
“We’re still seeing businesses expand and open," Mr. Nieves said. “Overall, it’s still a strong rate of growth."
This story has been published from a wire agency feed without modifications to the text.