Haver Analytics
Haver Analytics
| Jun 05 2024

U.S. ISM Services PMI Strengthens in May to Nine-month High

  • Increase reverses April’s sharp decline.
  • Business activity index surges while orders & employment rise.
  • Prices index slips.

The U.S. ISM Services PMI rose to 53.8 in May after falling sharply to 49.4 in April which was the lowest reading since December 2022, according to the Institute for Supply Management. The latest reading was the highest in nine months. An increase to 50.9 for May had been expected by the Action Economics Forecast Survey. A reading above 50 indicates expansion in the services sector.

Haver Analytics constructs a composite index combining the services index and the manufacturing index, which was released on Monday. This index rose to 53.2 in May from 49.4 in April but remained below the record 66.3 recorded in November 2021. The series dates back to July 1997.

The business activity index surged to 61.2 last month from 50.9 in April. It was the highest level since November 2022. Thirty percent of respondents (NSA) reported increased activity while 7.3% reported lower. The new orders index rose to 54.1 in May from 52.2 in April. Twenty-eight percent (NSA) of respondents reported higher new orders while 18.8% reported them lower. The employment index rose to 47.1 in May after falling to 45.9 in April. Thirteen percent of respondents (NSA) reported an increase in employment while 18.0% reported a decline. The supplier delivery index rebounded to 52.7 in May from 48.5 in April, indicating slower delivery times. This was the highest reading since November 2022. Five percent of respondents reported faster deliveries while 10.5% reported slower.

The prices paid index eased to 58.1 in May from 59.2 in April. It reached a recent high of 64.0 in January and a longer term high of 83.8 in March 2022. Twenty-six percent of respondents reported paying higher prices while 5.5% reported paying lower prices.

In other series, the export orders index surged to 61.8 (NSA) in May after falling to 47.9 in April. It was the highest level in eight months. The imports index plunged to 42.8 (NSA) in May after April’s rise to 53.6. The order backlog series eased to 50.8 (NSA) in May, but remained higher than the 40.9 low twelve months earlier.

The ISM Services PMI is a composite index that consists of four equally weighted diffusion indexes (25% each): Business Activity, New Orders, Employment, and Supplier Deliveries. A reading above 50 indicates expansion in the services sector; below 50 suggests contraction. The Supplier Deliveries index is inverted with a reading above 50 indicating slower deliveries. 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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