Economic activity in the services sector contracted in May, the first time since June 2024. The ISM Services Index registered 49.9%, 1.7 percentage points (pp) lower than the April figure of 51.6%.
“Ten industries reported growth in May, down one from the 11 industries reported in April. The Services PMI® has contracted in only four of the last 60 months dating back to June 2020. The May reading of 49.9% is 2.4 pp below the 12-month average reading of 52.3%,” said Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee. In May, the Services PMI® registered 49.9%, 1.7 pp lower than the April figure of 51.6%.
The Business Activity Index was ‘unchanged’ in May, registering 50%, 3.7 pp lower than the 53.7% recorded in April. This is the index’s first month out of expansion territory since May 2020. The New Orders Index dropped into contraction territory in May, recording a reading of 46.4%, a decrease of 5.9 pp from the April figure of 52.3%. The Employment Index returned to expansion after two months in contraction; the reading of 50.7% is 1.7 pp higher than the 49% recorded in April and is the second straight month-over-month gain,” said Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee.
The Inventories Index returned to contraction territory in May, registering 49.7%, a decrease of 3.7 pp from April’s figure of 53.4%. This is the second time the index has contracted in 2025. The Inventory Sentiment Index expanded for the 25th consecutive month, registering 62.9%, up 6.8 pp from April’s figure of 56.1% and its highest reading since July 2024 (63.2%). The Backlog of Orders Index registered 43.4% in May, a 4.6-percentage point decrease from the April figure of 48%, indicating contraction for the ninth time in the last 10 months and its lowest reading since August 2023 (41.8%).
Miller continues, “May’s PMI® level is not indicative of a severe contraction, but rather uncertainty that is being expressed broadly among ISM Services Business Survey panelists. The average reading of 50.8% over the last three months still indicates expansion in that time period, but it is a notable shift of 2 pp below its average of 52.8% over the previous nine months.”
Read the ISM release.
