Service Sector Rebounds Strongly in May After April Decline
Key sectors such as real estate, healthcare, and education saw significant gains, while employment continued to lag
After a 15-month growth streak in the services economy was interrupted in April, growth resumed in May, according to the latest Services ISM Report on Business issued today by the Institute for Supply Management (ISM).
The May Services PMI, at 53.8 (a reading of 50 or higher signals growth), was up 4.4% over April’s 49.4, which marked the first time the Services PMI contracted since December 2022, when it came in at 49 and before that the last month seeing contraction was in May 2020, when it came in at 45.4.
The May Services PMI is 1.3% above the 12-month average of 52.5, with August 2023’s 54.1 marking the high for that period and April’s 49.4 reading marking the low for that period.
ISM reported that 13 service sectors saw growth in May, including Real Estate, Rental & Leasing; Health Care & Social Assistance; Other Services; Educational Services; Utilities; Wholesale Trade; Construction; Transportation & Warehousing; Public Administration; Management of Companies & Support Services; Finance & Insurance; Information; and Professional, Scientific & Technical Services. However, five sectors experienced declines: Retail Trade; Agriculture, Forestry, Fishing & Hunting; Arts, Entertainment & Recreation; Accommodation & Food Services; and Mining.
The report’s equally weighted subindexes that directly factor into the NMI were largely positive from April to May, including:
- Business Activity/Production, at 61.2, up 10.3%, growing, at a faster rate, for the 48th consecutive month, hitting its highest reading since November 2022, at 61.2, with 13 services sectors reporting growth;
- New Orders, at 54.1, up 1.9%, growing, at a faster rate, for the 17th consecutive month, since contracting in December 2022, which was preceded by 30 straight months of growth, with 10 sectors reporting growth;
- Employment, at 47.1, was up 1.2%, contracting, at a slower rate, for the fourth consecutive month, with seven sectors reporting growth
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