US Service Providers Chalk Up Strongest Growth in Nine Months
- ISM services PMI jumped 4.4 points in May to 53.8
- Business activity posts biggest monthly gain in three years
By Vince Golle
Bloomberg, 06/05/2024
The US services sector expanded in May by the most in nine months, powered by the largest monthly gain in a measure of business activity since 2021.
The Institute for Supply Management’s composite gauge of services jumped 4.4 points, the most since the start of last year, to 53.8. Readings above 50 indicate expansion, and the May figure exceeded all forecasts in a Bloomberg survey of economists.
The ISM’s business activity index — which parallels the group’s factory output gauge — soared 10.3 points, the largest monthly advance since March 2021. At 61.2, the highest level since November 2022, the measure offers some reassurance for the economy after a recent spate of weaker data.
Earlier this week, the ISM said its manufacturing gauge dropped to a three-month low as a measure of orders fell by the most in almost two years and production nearly stagnated. The economy got off to an uninspiring start to the year — expanding at just a 1.3% annualized rate in the first quarter, the weakest performance since 2022.
While the manufacturing survey showed a notable pullback in bookings, orders placed with service providers expanded at faster pace in May. That indicates resilient demand in the largest part of the economy that continues to contribute to lingering inflationary pressures.
Export orders snapped back sharply in May, with the gauge showing the fastest growth in eight months.
The ISM index of prices paid for materials and services merely cooled to a still-elevated 58.1 from 59.2. Federal Reserve policymakers are gauging developments in the services sector for signs of easing price pressures as they debate when to reduce interest rates.
Meanwhile, the group’s supplier deliveries index climbed to the highest level since November 2022, indicating slower delivery times.
The measure of services employment climbed but remained in contraction territory.
An index of inventories at service providers showed a slower pace of accumulation. A gauge of sentiment about inventories also declined, while still indicating companies see their stockpiles as too high.