Economic activity in the services sector expanded in May for the fifth consecutive month but declined relative to April as the Services Purchasing Managers Index registered 50.3% even as retail showed improvement, according to a survey of purchasing and supply executives in the United States.
The report, issued by Anthony Nieves, chair of the ISM Services Business Survey Committee noted that the May services PMI of 50.3% was 1.6 percentage points lower than April’s reading of 51.9%.
“The composite index indicated growth in May for the fifth consecutive month after a reading of 49.2% in December, which was the first contraction since May 2020. 45.4%,” Nieves stated. “The Business Activity Index registered 51.5%, a 0.5-percentage point decrease compared to the reading of 52% in April. The New Orders Index expanded in May for the fifth consecutive month after contracting in December for the first time since May 2020. The figure of 52.9% is 3.2 percentage points lower than the April reading of 56.1%. The Supplier Deliveries registered 47.7%, 0.9 percentage point lower than the 48.6% recorded in April. In the last six months, the average reading of 48.%, with a low of 45.8% in March, reflects the fastest supplier delivery performance since June 2009, when the index registered 46%. Supplier Deliveries is the only ISM Report On Business index that is inversed; a reading of above 50% indicates slower deliveries, which is typical as the economy improves and customer demand increases.”
Nieves added the Prices Index slipped 3.4 percentage points in May to 56.2%. “The Inventories Index expanded in May after a month of contraction and two previous months of growth, preceded by eight straight months of contraction,” he said. “The reading of 58.3% is up 11.1 percentage points from April’s figure of 47.2%. The Inventory Sentiment Index, 61%, up 12.1 percentage points from April’s reading of 48.9%, expanded after a month of contraction preceded by four months of growth, with a four-month period of contraction before that. The Backlog of Orders Index registered 40.9%, an 8.8-percentage point decrease compared to the April figure of 49.7% and the index’s lowest reading since May 2009, 40%.”
Eleven services industries reported growth in May.
“The Services PMI, by being above 50% for a fifth month after a single month of contraction and a prior 30-month period of expansion, continues to indicate sustained growth for the sector,” Nieves pointed out. “The composite index has indicated expansion for all but three of the previous 160 months. There has been a pullback in the rate of growth for the services sector. This is due mostly to the decrease in employment and continued improvements in delivery times resulting in a decrease in the Supplier Deliveries Index, and capacity, which are in many ways a product of sluggish demand. The majority of respondents indicate that business conditions are currently stable. However, there are concerns relative to the slowing economy.”
The 11 services industries reporting growth in May are Accommodation & Food Services; Management of Companies & Support Services; Professional, Scientific & Technical Services; Utilities; Retail Trade; Arts, Entertainment & Recreation; Construction; Other Services; Transportation & Warehousing; Public Administration, and Educational Services. The seven industries reporting a decrease in the month of May are Mining; Agriculture, Forestry, Fishing & Hunting; Real Estate, Rental & Leasing; Wholesale Trade; Information; Health Care & Social Assistance, and Finance & Insurance.
For its part, according to ISM, economic activity in the manufacturing sector contracted in May for the seventh consecutive month following a 28-month period of growth, with PMI at 46.9%, 0.2 percentage point lower than the 47.1% recorded in April. The latest figure indicates a sixth month of contraction. The four manufacturing industries that reported growth in May are Nonmetallic Mineral Products; Furniture & Related Products; Transportation Equipment, and Fabricated Metal Products. The 14 industries reporting contraction in May are Wood Products; Primary Metals; Apparel, Leather & Allied Products; Textile Mills; Paper Products; Printing & Related Support Activities; Petroleum & Coal Products; Chemical Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Miscellaneous Manufacturing, and Machinery.
