Growth in U.S. service sector activity slowed by slightly more than expected in the month of May, the Institute for Supply Management revealed in a report released on Friday.
The ISM said its services PMI dipped to 55.9 in May from 57.1 in April, although a reading above 50 still indicates growth in the sector. Economists had expected the index to edge down to 56.4.
With the bigger than expected decrease, the services PMI dropped to its lowest level since a matching reading in February of 2021.
The slightly bigger than expected decrease by the headline index came as the business activity index slumped to 54.5 in May from 59.1 in April.
On the other hand, the report showed the new orders index rebounded to 57.6 in May from 54.6 in April, indicating an acceleration in the pace of growth.
The employment index also inched up to 50.2 in May from 49.5 in April, suggesting a slight increase in employment in the service sector compared to a modest contraction in the previous month.
With regard to inflation, the ISM said the prices index dropped to 82.1 in May from an all-time high of 84.6 in April.
“COVID-19 continues to disrupt the services sector, as well as the war in Ukraine,” said Anthony Nieves, Chair of the ISM Services Business Survey Committee. “Labor is still a big issue, and prices continue to increase.”
A separate report released by the ISM on Wednesday showed U.S. manufacturing activity unexpectedly expanded at a slightly faster rate in the month of May.
The ISM said its manufacturing PMI inched up to 56.1 in May from 55.4 in April. The uptick surprised economists, who had expected the index to dip to 54.5.
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