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June 9, 2022

ISM: Service Sector Still Grinding Out Growth

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According to the Institute for Supply Management, economic activity in the services sector grew in May for the 24th month in a row with the Services Purchasing Managers’ Index registered 55.9%, above the 50% gain/decline line.

Retail, however, didn’t fare particularly well.

Purchasing and supply executives in the United States polled for the latest Services ISM Report On Business still are a bit wary of the unsettled state of the U.S. economy.

As he issued the report, Anthony Nieves, chair of the ISM Services Business Survey Committee, said, “In May, the Services registered 55.9%, 1.2 percentage points lower than April’s reading of 57.1%. This is the lowest reading since February 2021, when the index also registered 55.9%. The Business Activity Index registered 54.5%, a decrease of 4.6 percentage points compared to the reading of 59.1% in April, and the New Orders Index figure of 57.6% is 3 percentage points higher than the April reading of 54.6%.

He said the Supplier Deliveries Index registered 61.3%, 3.8 percentage points lower than reported in April, pointing out that Supplier Deliveries is the only ISM Report On Business index that is inverse as a reading of above 50% indicates slower deliveries, which is typical as the economy improves and customer demand increases.

Nieves added:

The Prices Index dropped from the all-time high of 84.6% in April, decreasing 2.5 percentage points to 82.1%. Services businesses continue to struggle to replenish inventories, as the Inventories Index grew, but at a slower rate. The reading of 51% is down 1.3 percentage points from April’s figure of 52.3%. The Inventory Sentiment Index, 44.5%, down 2.2 percentage points from April’s reading of 46.7%, contracted in May for the third consecutive month, indicating that inventories are in ‘too low’ territory and insufficient for current business requirements.


According to the Services PMI, 14 industries reported growth. The composite index indicated growth for the 24th consecutive month after a two-month contraction in April and May 2020. Growth continues, albeit slower, for the services sector, which has expanded for all but two of the last 148 months. The sector’s slowdown was due to a decline in business activity and slowing supplier deliveries. The Employment Index, 50.2%, returned to expansion territory, and the Backlog of Orders Index grew, though at a slower rate. COVID-19 continues to disrupt the services sector, as well as the war in Ukraine. Labor is still a big issue, and prices continue to increase.

ISM pointed out that the 14 of the 17 it lists in its report grew in May, with Mining to Construction leading and followed by Real Estate, Rental & Leasing, Educational Services, Transportation & Warehousing, Management of Companies & Support Services, Utilities, Accommodation & Food Services, Wholesale Trade, Professional, Scientific & Technical Services, Arts, Entertainment & Recreation, Other Services, Health Care & Social Assistance, and Public Administration. Three industries reporting a decrease were Agriculture, Forestry, Fishing & Hunting, Retail Trade and Information.

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