Haver Analytics
Haver Analytics
| Jun 05 2023

U.S. ISM Services PMI Falls Below Expectations in May

  • Composite index declines to lowest level in six months.
  • Each component series weakens.
  • Prices index falls to three-year low.

Business activity in the service sector of the U.S. economy weakened last month, according to the Institute for Supply Management. The ISM Services PMI fell to 50.3 in May from 51.9 in April. It represents a retreat from more positive readings at the beginning of the year, after a low of 49.2 in December of last year. The index stands well below its peak of 67.6 in November 2021. A reading above 50 represents an increase in activity. The Action Economics Forecast Survey expected 52.5 for May.

Haver Analytics constructs a composite index combining the services index and the manufacturing reading released on Thursday. This index declined to 49.9 in May after rising to 51.4 in April. These readings remain down from the record 66.9 in November 2021. The series dates back to July 1997.

In the latest services survey, the new orders index fell to 52.9 from 56.1 in April. The index remained below a record 69.2 in October 2021. A lessened 23.4% of respondents reported more orders while a higher 16.2%% reported a decline. The supplier deliveries index fell to 47.7 (NSA) last month after increasing to 48.6 in April. Nine percent of respondents (NSA) reported faster delivery speeds while 4.3% reported slower speeds. The business activity reading weakened to 51.5 in May from 52.0 in April. Twenty percent of respondents reported activity improvement while 15.2% reported a lessening.

The employment index declined to 49.2 in May from 50.8 in April. It was the lowest reading since October, down from a February high of 54.0. A lessened 19.4% of respondent reported more hiring while an increased 18.7% reported less.

The prices index fell to 56.2 in May after rough stability at 59.6 in April. The index stands well below the record 84.5 in December 2021 and at the lowest level since May 2020. A lessened 24.9% of respondents (NSA) reported price gains while a higher 5.9% reported price declines.

Additionally, the new export orders index slipped to 59.0 in May after recovering to 60.9 in April. The reading remains positive, after plunging to 43.7 in March. The imports index fell to 50.0 from 51.3 in April. The backlog of orders index tumbled to 40.9 last month from 49.7 in April. It remained down from a record 67.3 in October 2021 and stood at the lowest level since May 2009. Working the other way, the inventory change index surged to 58.3 from 47.2 in April, representing a large degree of inventory accumulation. These series are not seasonally adjusted and not included in the ISM Services PMI total.

The ISM figures are available in Haver's USECON database, with additional detail in the SURVEYS database. The expectations figure from Action Economics is in the AS1REPNA database.

  • Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio.   Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984.   He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C.   In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists.   Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.

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