The Institute
for Supply Management (ISM) reported on Wednesday that its Services PMI came in
at 53.8 per cent in May, recording a climb of 4.4 percentage points from an unrevised April reading of 49.4 per cent. The latest figure indicated that economic
activity in the U.S. services sector in May grew at the strongest pace since
August 2023 (54.5).,
Economists had anticipated
the indicator to rise to 50.8 in May.
A reading above
50 signals expansion, while a reading below 50 indicates contraction.
According to
the report, the Production index surged by 10.3 percentage points to 61.2 per cent in May, indicating growth in output for the 48th
month in a row, the pace of which was the strongest since November 2022 (61.2 per cent). In addition, the New Orders gauge increased by 1.9 percentage points
to 54.1 per cent, indicating expansion for the 17th consecutive month. Meanwhile, the Employment
measure rose by 1.2 percentage points to 47.1 per cent, indicating employment
activity in the services sector contracted in May for the fourth straight month.
Elsewhere, the Inventories indicator fell by 1.6 percentage points to 52.1 per
cent, indicating inventories increased for the second successive month. The Supplier Deliveries indicator soared by 4.2 percentage points to 52.7 per cent, indicating slower
performance. The
Backlog of Orders index slipped 0.3 percentage points to 50.8 per cent,
indicating order backlogs in May advanced for the second straight
month after a decrease in April. On the price front, the Prices index fell by 1.1 percentage
points to 58.1 per cent, indicating that prices paid by services organizations for materials and
services went up in May for the 84th month running.
Commenting on
the data, the Chair of the ISM Services Business Survey Committee, Anthony
Nieves, said that the May surge in the composite index was a result of notably
higher business activity, faster new orders growth, slower supplier deliveries
and despite the continued contraction in employment. “Survey respondents
indicated that overall business is increasing, with growth rates continuing to
vary by company and industry,” he said, adding that employment challenges
remain, primarily attributed to difficulties in backfilling positions and
controlling labour expenses. Nieves also unveiled that most respondents indicated that inflation and the current interest rates were an
impediment to improving business conditions.