U.S. May ISM non-manufacturing index remains solid in May

The ISM non-manufacturing index for the U.S. continues to be in line with healthy activity in services in May. The ISM nonmanufacturing index dropped slightly to 56.9 in May from April’s reading of 57.5. Consensus expectations were for the index to drop to 57. Notwithstanding this moderation, the index stays slightly above its six-month average of 56.7 and is in line with other data on personal spending in the second quarter that imply stronger consumption of services.

Delving into subcomponents, the drop was mainly due to business activity that dropped to 60.7 from 62.4, and new orders that dropped from 63.2 to 57.7. Supplier deliveries were also modestly weaker. These three were sufficient to counter a strong recovery in employment index to 57.8 from 51.4. The 57.8 was the second highest reading seen by the employment subcomponent after the recession. The employment subcomponent indicates towards a stronger hiring in the services sector for June payrolls.

In all, today’s report is unlikely to avert the U.S. Fed from going ahead with its interest rate hike during the next week’s meeting, with market consensus still pricing in a June move, noted TD Economics in a research report. But, along with a few other weak reports of late, it lowers the possibility of additional rate hikes during the remainder of the year.

At 17:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was highly bearish at -137.627. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex