U.S. Service Sector Growth Slows More Than Expected In May

(RTTNews) - Service sector activity in the U.S. saw only modest growth in the month of May, according to a report released by the Institute for Supply Management on Monday, with the index of activity in the sector falling by more than expected.

The ISM said its services PMI fell to 50.3 in May from 51.9 in April, although a reading above 50 still indicates growth in the sector. Economists had expected the index to edge down to 51.5.

The bigger than expected decrease by the headline index was partly due to a slowdown in the pace of growth in new orders, as the new orders index slid to 52.9 in May from 56.1 in April.

The employment index also dropped to 49.2 in May from 50.8 in April, indicating a decrease in service sector jobs following three consecutive months of growth.

The report also showed the business activity index edged down to 51.5 in May from 52.0 in the previous month.

"There has been a pullback in the rate of growth for the services sector," said Anthony Nieves, Chair of the ISM Services Business Survey Committee. "This is due mostly to the decrease in employment and continued improvements in delivery times (resulting in a decrease in the Supplier Deliveries Index) and capacity, which are in many ways a product of sluggish demand."

The supplier deliveries index slipped to 47.7 in May from 48.6 in April, with a reading below 50 indicating faster deliveries.

Nieves added, "The majority of respondents indicate that business conditions are currently stable; however, there are concerns relative to the slowing economy."

On the inflation front, the prices index fell to 56.2 in May from 59.6 in April, suggesting a slowdown in the pace of price growth.

The ISM released a separate report last Thursday showing U.S. manufacturing activity contracted at a slightly faster rate in the month of May.

The ISM said its manufacturing PMI slipped to 46.9 in May from 47.1 in April, with a reading below 50 indicating a contraction. Economists had expected the index to edge down to 47.0.