ISM: Service sector declines in May

The ISM Services Index registered 50.3%, 1.6 percentage point decrease 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, the first contraction since May 2020 (45.4%)

“Eleven industries reported growth in May. The Services PMI®, by being above 50 percent 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. The composite index has indicated expansion for all but three of the previous 160 months.”

The Business Activity Index registered 51.5%, a 0.5-percentage point decrease compared to the reading of 52% in April.

The employment Index registered 49.2%, down 1.6 percentage points from the April figure of 50.8%. Comments from respondents include: “We are trying to do more with the same staff because margins in the industry have compressed” and “Our company is currently on a hiring freeze until there’s a better understanding of where the economy is headed.”

The New Orders Index registered 52.9%, down 3.2 percentage points from the April reading of 56.1%. The index indicated expansion for the fifth consecutive month after contracting in December, ending a string of 30 consecutive months of growth. Comments from respondents include: “New contracts coming online” and “New orders up with demand.”

The Supplier Deliveries Index registered 47.7%, down 0.9 percentage points from the 48.6% recorded in April. A reading above 50% indicates slower deliveries, while a reading below 50% indicates faster deliveries. The May reading indicates supplier deliveries are faster, but at a slower rate compared to the previous month. Comments from respondents include: “No delivery performance issues; supply on goods and services all good” and “Some suppliers are increasing capacity, while others have reduced their backlogs.”

Read the ISM release.