Service sector activity in the U.S. returned to growth in the month of May after contracting in April for the first time since December 2022, accordin
Service sector activity in the U.S. returned to growth in the month of May after contracting in April for the first time since December 2022, according to a report released by the Institute for Supply Management on Wednesday.
The ISM said its services PMI jumped to 53.8 in May from 49.4 in April, with a reading above 50 indicating growth in the sector. Economists had expected the index to inch up to 50.8.
With the much bigger than expected increase, the services PMI reached its highest level since hitting 54.1 in August 2023.
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“Survey respondents indicated that overall business is increasing, with growth rates continuing to vary by company and industry,” said Anthony Nieves, Chair of the ISM Services Business Survey Committee.
The surge by the headline index partly reflected a significant acceleration in the pace of growth in business activity, as the business activity index spiked to 61.2 in May from 50.9 in April.
The new orders index also climbed to 54.1 in May from 52.2 in April, while the employment index rose to 47.1 in May from 45.9 in April but continued to indicate a contraction.
The report also said the prices index slipped to 58.1 in May from 59.2 in April, suggesting a modest slowdown in the pace of price growth.
“The majority of respondents indicate that inflation and the current interest rates are an impediment to improving business conditions,” said Nieves.
On Monday, the ISM released a separate report showing manufacturing activity in the U.S. unexpectedly contracted at a slightly faster rate in the month of May.
The ISM said its manufacturing PMI edged down to 48.7 in May from 49.2 in April, with a reading below 50 indicating contraction. Economists had expected the index to inch up to 49.6.
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