S&P Global Services PMI: Strongest Expansion in Over a Year

The May US services purchasing managers' index (PMI) conducted by S&P Global came in at 54.9, which was just below the 55.1 forecast. This morning's reading keeps the index in expansion territory for the fourth straight month and is the strongest reading in over a year.

From the latest press release, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said:

"The US continued to see a two-speed economy in May, with the sluggishness of the manufacturing sector contrasting with a resurgent service sector. Businesses in sectors such as travel, tourism, recreation and leisure are enjoying a mini post-pandemic boom as spending is switched from goods to services.

"The survey data are indicative of GDP growing at an annualized rate of just over 2%, and an upturn in business expectations points to growth remaining robust as we head further into the summer.

"However, just as demand has moved from goods to services, so have inflationary pressures. While goods price inflation has fallen dramatically in May to register only a marginal increase, prices charged for services continue to rise sharply. Although down considerably on last year's peaks, service sector inflation remains higher than any time in the survey's 10-year history prior to the pandemic, bolstered by a combination of surging demand and a lack of operating capacity, the latter in part driven by labor shortages.

"However, while rejuvenated service providers will make hay in the summer season, the weakness of manufacturing raises concerns about the economy's resilience later in the year, when the headwind of higher interest rates and the increased cost of living is likely to exert a greater toll on spending."

Here is a snapshot of the series since mid-2012.

S&P Global Services PMI