The Institute of Supply Management (ISM) has now released its May services purchasing managers' index (PMI). The headline composite index is at 50.3, which was below the forecast of 51.8. The latest reading marks the fifth consecutive month the index has been expansion territory.
Here is the report summary:
(Tempe, Arizona) — Economic activity in the services sector expanded in May for the fifth consecutive month as the Services PMI® registered 50.3 percent, say the nation's purchasing and supply executives in the latest Services ISM® Report On Business®. The sector has grown in 35 of the last 36 months, with the lone contraction in December of last year.
The report was issued today by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee: “In May, the Services PMI® registered 50.3 percent, 1.6 percentage points lower than April’s reading of 51.9 percent. The composite index indicated growth in May for the fifth consecutive month after a reading of 49.2 percent in December, which was the first contraction since May 2020 (45.4 percent). The Business Activity Index registered 51.5 percent, a 0.5-percentage point decrease compared to the reading of 52 percent 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 percent is 3.2 percentage points lower than the April reading of 56.1 percent.
“The Supplier Deliveries registered 47.7 percent, 0.9 percentage point lower than the 48.6 percent recorded in April. In the last six months, the average reading of 48.0 percent (with a low of 45.8 percent in March) reflects the fastest supplier delivery performance since June 2009, when the index registered 46 percent. (Supplier Deliveries is the only ISM® Report On Business® index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.)
“The Prices Index was down 3.4 percentage points in May, to 56.2 percent. The Inventories Index expanded in May after a month of contraction and two previous months of growth, preceded by eight straight months of contraction; the reading of 58.3 percent is up 11.1 percentage points from April’s figure of 47.2 percent. The Inventory Sentiment Index (61 percent, up 12.1 percentage points from April’s reading of 48.9 percent) 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 percent, an 8.8-percentage point decrease compared to the April figure of 49.7 percent and the index’s lowest reading since May 2009 (40 percent).
“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.”
Nieves continues, “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.” [Source]
Unlike its much older kin, the ISM manufacturing series, there is relatively little history for ISM's non-manufacturing data, especially for the headline composite Index, which dates from 2008. The chart below shows the non-manufacturing composite.
