U.S. ISM non-manufacturing index rises in May

The U.S. ISM non-manufacturing index rose in May following three straight declines. The index rose 1.8 points to 58.6. The headline print came in above expectations, which called for a more moderate rise of 0.8 points. On a year-on-year basis, the index came in at 1.5 points above its level one year ago.

Strength was widespread. Eight of the index’s ten subcomponents rose on the month, indicating a more rapid rate of growth. Backlog orders rose sharply by 8.5 points to 60.5 – the highest level on record. Business activity and new orders also quickened on the month. Consistent with a rise in business activity and new orders, non-manufacturing companies increased their hiring in May, with employment subcomponent rising by 0.5 points to 54.1.

Inflation pressure continued to rise, with the prices paid subcomponent rising for the third straight month. It is currently at the highest level since September 2017. The supplier deliveries subcomponent rose 4 points to 58.5, showing slower deliveries. Comments from respondents implied that a shortage of truck drivers were decelerating deliveries and affecting business operations.

Trade activity slowed in May. Export orders and imports were the only two subcomponents to post a fall. Out of 18 non-manufacturing industries surveyed, 14 saw recorded growth on the month and three recorded stable activity. Information services was the only industry to record a decline.

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