Virginia Governor Abigail Spanberger is facing backlash after refusing to rule out new taxes on everyday services like gym memberships and streaming subscriptions, according to the Daily Mail.

During an interview with 8News, the Virginia governor was asked whether she would sign legislation expanding the state’s sales tax to cover a long list of services. Rather than rejecting the idea outright, Spanberger said any proposal that seems “reasonable” should at least be part of the conversation as lawmakers search for new sources of revenue.

“I think every idea, as long as it’s reasonable and makes some amount of sense, should be entertained should be discussed,” she said.

“You mentioned the one on streaming services, you used to buy a DVD, there was a sales tax. Streaming is different,” she added. “I recognize there is value in having these conversations, but whether I’d ever sign a bill is wholly predicated on what is actually in the bill, and how it is outlined.”

“I think there are worthy conversations to be had about what revenue generation looks like into the future as our economy changes in so many ways.”

The Daily Mail writes that the proposals floated in Richmond this year would have expanded taxes to services that have traditionally been exempt, including self-storage units, dry cleaning, vehicle repairs, counseling, website design, cloud storage, and digital subscriptions.

One measure, HB978, would have specifically added sales taxes to fitness memberships and athletic clubs. None of the bills cleared the General Assembly before lawmakers adjourned in March, so Spanberger hasn’t had to make a final decision yet.

Critics argue the proposals are a preview of where Virginia’s tax policy could be heading under its new Democratic leadership.

Spanberger campaigned as a moderate but has already drawn criticism from conservatives over several early policy moves, and her comments are likely to add fuel to that debate. And for anyone hoping their gym membership or Netflix bill might be safe — Virginia lawmakers appear to be eyeing both your workout routine and your weekend binge-watch. Because apparently paying taxes on your paycheck, groceries, and utilities just wasn’t ambitious enough.

By Diana DiGangi of UtilityDive,

The company has 28 large load projects representing 11 GW under contract, and Georgia Power’s first-quarter capital expenditures increased year over year from $1.6 billion to $2 billion.

Southern Company reported 2.3% year-over-year growth in retail electricity sales across its utilities for the first quarter of this year, driven predominantly by data centers.

Overall, data centers used 42% more power compared to the first quarter of 2025, according to company officials and Southern’s quarterly report to the Securities and Exchange Commission. The company has 28 large load projects representing 11 GW under contract, up slightly from 26 projects at 10 GW at the end of 2025, it said.

Across Southern’s vertically-integrated electric utilities in Alabama, Georgia and Mississippi, its largest subsidiary, Georgia Power, increased its first-quarter capital spending year-over-year from $1.6 billion to more than $2 billion.

Last week, Georgia Power filed a request with regulators seeking an additional 2 GW to 6 GW in new, all-source capacity, including thermal generation, energy storage systems and battery storage plus renewables, to meet rising energy demands.

The 2.3% growth “represents the highest total retail sales growth that we’ve seen in the first quarter in recent history,” said CFO David Poroch on a Thursday earnings call. “The commercial class grew 4.5% in the first quarter when adjusted for weather, bolstered by ongoing growth in data centers.”

BY THE NUMBERS: SOUTHERN COMPANY Q1 2026

11 GW: Total capacity of contracted large loads as of Q1 2026.
2.3%: Q1’s year-over-year increase in retail electricity sales.
$2B: Georgia Power’s Q1 capital expenditures.
400 MW: The amount of gas capacity that Southern Company plans to add through turbine upgrades at existing facilities in Alabama and Georgia.
$26.5B: The size of the Department of Energy loan package that Southern Company closed on in February.

Outside of signed contracts, Poroch said Southern is finalizing another 6 GW of large load customers and claims to have a “prospective pipeline” of 75 GW, according to its earnings presentation.

“We continue to see incredible momentum and tangible interest for power from large load customers,” said CEO Chris Womack.

The company also provided details on its $26.5 billion loan agreement with the Department of Energy, announced in February, to “build or upgrade over 16 GW of firm reliable power to the electrical grid,” DOE said in a release.

“This includes 5 GW of new gas generation, 6 GW in nuclear improved through uprates and license renewals, hydropower modernization, battery energy storage systems and over 1,300 miles of transmission and grid enhancement projects,” DOE said.

According to its presentation, the company has divided loan-eligible projects by type, with 36% being thermal generation, 21% transmission, 20% distribution and the rest split between hydro, storage and nuclear.

Southern’s work to bolster generation also includes uprates at some of its existing gas generation at plants in Alabama and Georgia that would add 400 MW at a cost of about $700 million over the next several years, “with commercial operation projected between 2029 and 2031,” Poroch said. 

The company is also evaluating an additional 300 MW of natural gas upgrades, Poroch said.

When asked about the potential for upcoming nuclear deals, Womack said that he is “very excited” about the momentum around nuclear, but that the company is “not at a place to make a commitment about building a new unit.”

“We’re going to continue to share the experiences that we gain from Vogtle Units 3 and 4,” he said. “But I’m very thrilled and very excited about the conversations and the commitments and the actions that are being taken, particularly around doing more around AP1000s with a group of companies.”

PayPal shares fell 10% in the early U.S. cash session after CEO Enrique Lores began a turnaround effort aimed at “taking deliberate steps to sharpen focus and accelerate growth.”

Lores is pushing forward with a new turnaround plan that could generate at least $1.5 billion in savings for the struggling payment platform over the next two to three years. This will allow the company to reinvest in technology modernization. Lores said in an earnings release that PayPal needs to simplify operations, reduce its cost structure, and focus its investments:

“I’m energized by the opportunity to improve execution and accelerate PayPal’s growth. The company has valuable assets in our brands, technology, and team – and there is significant potential ahead of us.

We are taking deliberate steps to sharpen our strategy, simplify our organization, and improve both our growth trajectory and cost structure by focusing our investments where we believe they will have the greatest impact.

I am confident in our ability to put the company on a more durable path to long-term growth and shareholder value creation, and we are executing with urgency.”

Lores did not provide specifics on the scale of the coming job cuts, but Bloomberg data show that PayPal has already been trimming its workforce for several years.

The headcount peaked at nearly 31,000 employees in 2021 and has since been reduced to 23,800 as of year-end 2025.

Earlier, the Coinbase CEO announced plans to reduce the company’s workforce by 14%, or about 700 employees.

Block recently told investors it would eliminate 4,000 workers, nearly half of its workforce.

We’re confident the white-collar job apocalypse will only continue as AI agents replace human workers to streamline operations and trim costs. 

Whatever happened to Stripe’s takeover plan of PayPal?

Authored by Amy Howe via scotusblog.com,

The Supreme Court on Monday night granted a request to immediately finalize its opinion in Louisiana v. Callais, in which it struck down that state’s congressional map, to allow Louisiana to draw a new map in time for the 2026 elections.

[ZH: Democrats are raging as] that map is expected to favor Republicans, who currently hold four of the state’s six seats in the U.S. House of Representatives but could pick up one or even two more under a revised map.

The United States Supreme Court, in the eyes of America and the world. pic.twitter.com/xerjBPgDz4

— Bill Madden (@maddenifico) May 1, 2026

The court’s decision drew sharp criticism from Justice Ketanji Brown Jackson, the lone dissenter. Jackson argued that the court’s ruling “has spawned chaos in the State of Louisiana.”

Justice Samuel Alito, joined by Justices Clarence Thomas and Neil Gorsuch, wrote a concurring opinion that responded to Jackson with equally sharp words, countering that her rhetoric “lacks restraint.”

🚨 JUSTICE SAMUEL ALITO HAS HAD IT WITH KETANJI BROWN JACKSON

Joined by Clarence Thomas and Neil Gorsuch, Alito EVISCERATED Jackson for her combative and “insulting” dissent:

“Instead the dissent offers 2 reasons for its proposed course of action. One is TRIVIAL at best, and… pic.twitter.com/u4idr8ALPT

— Eric Daugherty (@EricLDaugh) May 5, 2026

In an unsigned, one-paragraph order, the court explained that, to give the losing party time to ask the justices to reconsider their decision, the Supreme Court’s clerk normally waits 32 days after a decision is issued before sending a copy of the opinion and the judgment to the lower court.

But, the court wrote, in this case the Black voters defending the map at the center of the dispute “have not expressed any intent to ask this Court to reconsider its judgment.”

The court issued its decision in Louisiana v. Callais on Wednesday, April 29. By a vote of 6-3, it invalidated a map adopted by the Louisiana Legislature in 2024, which created two majority-Black districts after two lower courts ruled that an earlier map with just one majority-Black district likely violated Section 2 of the Voting Rights Act, which bars racial discrimination in voting.

Later that day, the “non-African-American” voters who had challenged the 2024 map came to the Supreme Court, asking the justices to bypass its normal 32-day waiting period and finalize the opinion as soon as possible. The voters told the justices that the Louisiana Legislature was “considering pushing back” the deadlines for the state’s congressional primaries to allow them “to occur under a remedial map.” Finalizing the opinion immediately, they argued, could give the state more breathing room in which to operate, given the short timeframe in which the state would need to revise the map.

One day later, Louisiana told the court that it would indeed postpone the state’s primary elections for Congress, which had been scheduled for May 16. In the view of Louisiana Gov. Jeff Landry, a Republican, the use of the 2024 map would constitute the kind of emergency that justifies a postponement under Louisiana law, because “electing members to Congress under an unconstitutional map flies in the face of the United States Constitution and subjects Louisiana voters to representatives that are impermissibly elected as determined by the United States Supreme Court, in a 6-3 decision.”

In her four-page dissent, Jackson suggested that the court itself was taking sides in the battle over redistricting. She wrote that developments in the wake of last week’s ruling in Callais “have a strong political undercurrent.” Louisiana’s effort to redistrict, she said, “unfolds in the midst of an ongoing statewide election, against the backdrop of a pitched redistricting battle among state governments that appear to be acting as proxies for their favored political parties.”

Moreover, Jackson noted, in the last 25 years, when one litigant has objected to a request to fast-track the issuance of its final opinion, the court has only granted the request twice. “To avoid the appearance of partiality,” she emphasized, “we could … opt to stay on the sidelines and take no position by applying our default procedures.” But by granting the challengers’ request, she said, the court’s action “is tantamount to an approval of Louisiana’s rush to pause the ongoing election in order to pass a new map.” 

In a five-paragraph concurring opinion, Alito called Jackson’s suggestion that the court should allow the 32-day waiting period to expire “to ‘avoid the appearance of partiality’” “baseless and insulting.” Complying with the waiting period, Alito posited, could itself be construed as partisan, because it would favor the defenders of the 2024 map. Alito also pushed back against Jackson’s contention “that our decision represents an unprincipled use of power,” calling it a “groundless and utterly irresponsible charge.”

The Louisiana Legislature plans to hear public comments on Friday on a new proposed map, which would include one majority-Black district. Meanwhile, lawsuits have been filed in both federal and state courts in Louisiana, challenging Landry’s postponement of the May 16 primary.

Ferrari shares fell as much as 3% in Milan after first-quarter results showed stronger-than-expected profit and cash flow, but the beat was overshadowed by a plunge in deliveries in the Middle East, as the U.S.-Iran conflict disrupted shipments to one of the luxury automaker’s key markets.

Ferrari’s first-quarter results were broadly ahead of expectations on profit, revenue, and cash flow, but deliveries across EMEA, which includes Europe, the Middle East, and Africa, were the clear outlier.

Regional shipments fell to 1,458 units, down 14% year over year and well below the Bloomberg consensus estimate of 1,651, underscoring a wartime-disrupted supercar market.

Here’s a snapshot of the first quarter (courtesy of Bloomberg):

Ebitda EU722 million, +4.2% y/y, estimate EU710 million (Bloomberg Consensus)

Ebitda margin 39.1%, estimate 39.3%

Ebit EU548 million, +1.1% y/y, estimate EU541.5 million Ebit margin 29.7% vs. 30.3% y/y, estimate 29.7%

Net income EU413 million, +0.2% y/y, estimate EU405.7 million

Industrial free cash flow EU653 million, estimate EU516.1 million

Diluted EPS EU2.33 vs. EU2.30 y/y, estimate EU2.30

Revenue EU1.85 billion, +3.2% y/y, estimate EU1.82 billion

Cars and spare parts revenue EU1.56 billion, +1.3% y/y, estimate EU1.54 billion

Sponsorship, commercial and brand revenue EU218 million, +14% y/y, estimate EU203.9 million

Other revenue EU74 million, +16% y/y, estimate EU70.6 million

Deliveries 3,436, -4.4% y/y, estimate 3,520

EMEA deliveries 1,458 units, -14% y/y, estimate 1,651 (2 estimates)

Americas Deliveries 1,030 units, +0.8% y/y, estimate 1,043 (2 estimates)

Mainland China, Hong Kong and Taiwan 255 units, +7.6% y/y, estimate 253.18 (2 estimates)

Rest of APAC deliveries 693 units, +9.5% y/y, estimate 630.23 (2 estimates)

Ferrari confirmed its 2026 guidance, citing strong order-book visibility toward the end of next year.

Goldman analyst Christian Frenes commented on the guidance, noting:

2026 guidance confirmed with room for upgrades: Ferrari confirmed its guidance for FY26 revenues of ~€7.5bn (cons €7.57bn, GSe €7.89bn), adj. EBIT of >=€2.22bn (€2.25bn, GSe €2.32bn) and ind. FCF >€1.5bn (cons €1.56bn, GSe €1.61mn). We continue to expect Ferrari to upgrade its conservative 2026 guidance in 2Q/3Q26 as we expect mix to continue to accelerate towards 2H26 supported by the ramp-up of the F80 supercar and the 296 Versione Speciale. On current guidance, the FY26-30 CAGR to FY30 targets is in line with CMD guidance of 5% on revenue as well as the EPS level, with any upgrades implying management’s willingness to grow above the medium-term growth floor.

Other analyst commentary (courtsey of Bloomberg):

Jefferies (buy)

Analysts led by James Grzinic say group has managed to limit margin unwind despite major FX headwinds and a quarterly trough in shipments

Say there “should be no surprise from today’s reiteration of 2026 guidance”

JPMorgan (overweight)

Analysts led by Jose Asumendi write that it was overall a strong quarter

Say want to better understand how firm plans to offset some FX and fixed cost headwinds during conference call

Oddo BHF (neutral)

Analysts say the results are broadly in line with expectations

This may be a “slight disappointment” as Ferrari is usually expected to beat and messaging was “quite bullish” in a pre- close call

Focus will shift to any commentary in the call around effects of Middle East crisis

“Order book is described as ‘further extending towards the end of 2027,’ vs ‘towards 2027’ at the time of the FY25 results report,” they note

Bloomberg data show that 77.4% of Wall Street analysts covering Ferrari have a “Buy” rating, while 22.6% are “Neutral” and 0% are “Sell.”

Ferrari shares…

Ferrari is set to unveil its fully electric supercar, the Luce, later this month. As we noted last week, sports car buyers are shunning hybrids and chasing V-8s and V-12s.

Two months ago, the BLS reported that January job openings unexpectedly soared by 400K, the biggest increase since November 2024, to 6.946MM, the highest since last October. Then, one month later it turned out the jump was even higher than that when the BLS published the February JOLTS print, when we learned that the January job print was revised massively higher by another 300K to 7.240MM from 6.946MM, a surge of 690K and the biggest since 2022; February job openings however promptly tumbled back to 6.882MM, or just shy of the 6.890MM estimate. Fast forward to today when we just got the latest, March, job openings print which saw another modest drop, sliding from the upward revised February print of 6.922MM to 6.866MM, or practically in line with estimates of 6.850MM. 

According to the BLS, the number of job openings plunged in professional and business services (-318,000) but increased in finance and insurance (+98,000). There were also increases in Private Education and Health services, Construction and Manufacturing jobs, offset by a modest drop in Leisure and Hospitality. 

Meanwhile, the slid in government and federal job openings continues.

The modest drop in March job openings, coupled with the bigger drop in unemployed workers means that there were 373K fewer job openings than unemployed workers in March, an improvement from the 649K in February.

It also means that after rising back to 1.0x in January, in March the ratio of job openings to unemployed dropped back to 0.9x where it has generally been since last summer.

But while the job openings number was largely in line with expectations, recent revision gimmicks notwithstanding, the real surprise in this month’s print was the number of Quits and Hires, both of which surged from 6 year lows. 

The number of hires soared to 5.554 million (+655,000) and the rate increased to 3.5% in March, more than offsetting decreases in those measures the previous month. The number of hires increased in transportation, warehousing, and utilities (+108,000), and edged up in professional and business services (+165,000) and in accommodation and food services (+124,000). Hires decreased in federal government (-7,000).

As for quits, in March the number of quits also jumped, if less forcefully, by 125K to 3.171MM, led by quits in real estate and rental and leasing (+19,000). 

Putting the hiring surge in context, the 655K increase in March hires was the best month since +4.1 million print recorded in April 2020 in the aftermath of the covid crisis, and the second highest ever. Stripping away the one-time covid shock, March was a record month for hiring which in light of everything else in the economy, does not really make much sense.

Since this number feeds directly into the payrolls calculations (after netting out separations) this explains why the March payrolls report was so much stronger (178K) than expected.

Overall, this was a solid JOLTS report and shows that after some significant weakness in late 2025, US labor market has managed to stabilize in early 2026. Of course, the report also lags the payrolls report by a month, which is why it gives us little insight into what Friday’s jobs report will be. 

Anyone has been in the bond markets for more than a minute remembers the fall of 2022 when UK PM Liz Truss was unceremoniously dumped by her own party after serving 45 days in office as the Gilts market collapsed at unprecedented speed amid economic chaos triggered by her ‘mini-budget’ (and multiple ministerial resignations).

The reason we reminisce is that this morning – after a long-weekend closed – UK Gilt yields are soaring once again… to their highest level since 1998 (and are a stunning 80bps above the Trussian highs) as worries intensified over local government elections and the impact of soaring energy prices on the economy.

While bond investors around the world have signaled their discontent with faster inflation and potentially higher interest rates, the UK stands out as the most extreme example.

As Bloomberg reports, the combination of Britain’s messy political landscape, with unpopular Prime Minister Keir Starmer likely to face a leadership challenge, feeble economy and strained government finances have made it a target for traders looking for a weak link.

“The market has one eye on the fact that Starmer’s days are numbered, and if not numbered then a further move to the left of the political spectrum is inevitable in an attempt to head off support for the Green party,” said Lloyd Harris, head of fixed income at Miton Group.

The UK 10-year yield has jumped 70 basis points since the start of the war, the biggest increase among a basket of developed markets tracked by Bloomberg over that period.

The UK’s problems are both domestic and foreign.

This coming Thursday’s May local elections should keep focus high on the lingering risks of a flare-up in UK political or fiscal premium.

Goldman Sachs traders believe that options markets are right to price-in relatively limited vol premium for the day itself.

The larger risks are likely in the form of either leadership challenges to the PM, or a shift in focus back to a constrained fiscal position on account of the evolution of energy prices and Gilt yields throughout the energy shock, and both of these are likely less immediate.

And even if these risks do materialise, we expect the impact on Sterling to come as bouts of currency underperformance rather than a more concerted trend lower, consistent with the pattern over the past year.

However, in the minds of investors, big losses at the ballot box raise the chances that either Starmer or his replacement would have to boost government spending to win back disaffected voters, which would further pressure the UK’s finances.

On top of that, the UK’s reliance on imported energy has left it vulnerable to an economic shock from the war in the Middle East.

With oil prices stuck above $100, the fear is that faster inflation will force the central bank to hike interest rates even further.

Markets are now pricing in three quarter-point rate hikes this year, up from two last week.

Additionally, Bloomberg reports that some have speculated that the traditional buyers of UK bonds, like pension funds, aren’t as active in the market as they used to be, which is also helping to drive up yields.

For decades, British defined-benefit pension funds bought long-dated bonds to match against their liabilities, allowing the UK to extend the average maturity of its issuance well beyond peers. Many of those programs are now winding down.

While Starmer has outlasted Truss stay in office, the bond market appears to be demanding/predicting/fearing his fate may well be the same… and soon (for better or worse).

After collapsing in January (-17.6% MoM – worst since July 2013 amid weather disruptions), US New Home Sales have risen strongly for two straight months – up 8.9% MoM in February and up 7.4% MoM in March…

Source: Bloomberg

This lifted new home sales by 3.3% YoY, but the total SAAR remains below Dec 2025 levels…

Source: Bloomberg

New home sales have really gone nowhere in three years.

Median new home prices plunged in March from $407k to $387.4k – its lowest since July 2021.

That is the biggest gap between median and average prices on record…

Implying a relatively small number of large/high value sales (outliers or a long right tail) are dragging the mean upward, while most of the sales cluster on the lower side as the supply of new homes also plunged.

Mortgage rates are higher in the last month but had fallen notably during the reporting period for today’s data…

By region, sales in the South, the nation’s biggest home-selling region, increased 11.1%, while purchases in the Northeast rebounded sharply.

March contract signings fell in the Midwest and West.

Homebuilders, who have been using a combination of incentives and price cuts, saw a pickup in prospective-buyer traffic in March after severe winter weather limited buyer demand early this year.

So it appears the market is doing Trump’s job for him (despite rising rates) as price-drops improve affordability (which is shaping up to be a key issue in the midterm elections in November.

Submitted by Molly Schwartz, Cross-Asset Marco Strategist at Rabobank

We have maintained the view that markets are sorely underestimating the impact that the war in Iran will have on global economies and financial markets, and that one day there would come a reckoning. While markets are still highly volatile and the situation in the Middle East highly uncertain, yesterday’s price action suggested that some traders are getting a reality check.

Remember folks, we’re still in a ceasefire! The iffy terms as to whether other countries in the region like Israel, Lebanon, and the UAE were fair game were never decidedly concluded, though the Strait of Hormuz was expected to remain open.

The drone attacks came after announcements from FARS early in the morning yesterday that the IRGC had struck an American warship near Jask Island, around 160km from the chokepoint (that’s 100 miles in freedom units). CENTCOM immediately denied that any US military assets had been struck, but the warship did appear to be associated with the UAE.

The drone strikes escalated further, with Iran attacking critical energy infrastructure in the UAE, including drones striking the Fujairah port—the first such attacks against the UAE in nearly a month, though these were not the first attacks targeted in Fujairah since the onset of the war. Iranian state TV quoted a military official who said that there had been “no premeditated plan to attack oil facilities in UAE’s Fujairah,” but rather it was the “result of the US military’s adventurism to create passage for illegal ship transit” through the Strait.

Trump announced that the US would spearhead an initiative called “Project Freedom” to escort ships who are “neutral and innocent bystanders” out of the Strait. There have yet to be concrete details provided, though the process technically began yesterday morning “Middle East time.” According to Bloomberg, the lack of clear assurances has left “several shipowners” skeptical, so it may take a while before we see anyone take up the Administration’s offer for “clear passage.”

US Treasury yields surged higher yesterday in a bear flattening fashion, with the 2 year up 8.3bp, approaching the 4.00% level, while the 10 year climbed 7.2bp to approach 4.50%. This comes as brent crude oil grinded back to $114/bbl amid the escalation in regional tensions.

With tensions escalating, US 2 year breakevens have also started climbing higher, breaking their highest level since April 8. Meanwhile, 5-year, 5-year inflation swap forwards have been heading higher as well, breaking their highest level since February 13 at 2.45%. The US OIS curve is reflecting this increased market hawkishness as well, now suggesting around 8bp worth of Fed hikes by year end.

We have posed the idea that the existence of what appears to be the world’s worst ceasefire comes as US efforts to de-escalate so as to escalate down the line. It also appears that the Trump Administration may have been deregulating to regulate.

In other news, the New York Times reported that the US is considering “vetting AI models before they are released.” This comes several weeks after an emergency meeting was hosted with leaders from major institutions, including Powell and Bessent, after it was discovered that Anthropic’s newest unreleased model, Mythos, posed serious cyber security issues if leveraged by malicious actors.

In early 2025, Trump rolled back a Biden-era executive order to establish guidelines for testing and regulating AI systems in his own executive order called “Removing Barriers to American Leadership in Artificial Intelligence,” which seeks to “revoke certain existing AI policies and directives that act as barriers to American AI innovation, clearing a path for the United States to retain global leadership in Artificial Intelligence.”

The approach as presented by the NYT suggests a change in hear from the Administration, as the executive order would “create an AI working group that would bring together tech executives and government officials to examine potential oversight procedures,” as well as a “formal government review process for new AI models.” When and if this executive order comes to fruition, it might be a fun exercise to compare and contrast the Biden and Trump orders and see how much they have in common.

The US Treasury Department released its QRA yesterday, announcing USD 189bn in net borrowing for Q2, up USD 79bn from its Q1 estimates due to “lower projected net cash flows,” but “partially offset by the higher-than-assumed beginning-of-quarter cash balance” which is USD 122bn higher than previously estimated. Additional details will be released on Wednesday.

Despite Manufacturing surveys solid (and US factory orders surging), expectations are for the Services sector surveys today to show stagflationary signals (weak growth, surging prices).

S&P Global’s Services PMI disappointed in April (final), falling from its flash print of 51.3 to 51.0, but still up from multi-year lows below 50 in March, showing just marginal activity growth despite weak drop in sales volumes.

ISM Services PMI also disappointed in April, falling from 54.0 to 53.6 (vs 53.7 exp) amid tumbling new orders and high prices.

Source: Bloomberg

Under the hood it was not a pretty picture at all with new orders slowing dramatically, Prices Paid holding near cycle highs, and employment contracting for the second month in a row…

“Although business activity returned to growth after a small decline in March, it’s clear the pace of growth has kicked down a couple of gears since the start of the year,” said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.

The survey data are indicative of GDP growing at a modest 1% annualized rate.

“Growth may weaken further,” warns Williamson, as service providers are reporting lower inflows of new business for the first time in two years, reflecting an intensifying hit to demand from the war in the Middle East.

“The direct impact of the war has been most evident in consumer-facing services, as high prices have led to a pull-back in discretionary spending on activities such as holidays and recreation, though transport has also been curbed by high fuel prices and travel disruptions.” 

However, a secondary additional driver of renewed weakness is a drop in demand for financial services, in part linked to heightened uncertainty about market outlooks but also reflecting expectations of higher inflation and interest rates, which has hit real estate and lending activity.

But it’s not just weak growth/orders, prices are surging too… broadly.

“A further increase in input cost inflation reflected not just higher fuel prices but a widening spread of goods and services rising in price, as well as higher wages, which will feed through to consumer price inflation in the coming months.”

The scale of the price rises will put pressure on the Fed to prevent higher inflation becoming entrenched, but the smell of stagflation remains in the air – central bankers’ arch-nemesis.