Economic activity in the services sector accelerated in May, with retail among the industries reporting growth, as the Institute for Supply Management’s Services PMI increased to 54.5% from 53.6% in April.
In reviewing results from ISM’s polling of purchasing and supply executives, Steve Miller, chair of the ISM Services Business Survey Committee, said the 54.5% May reading represented an increase of 0.9 percentage point as compared to the April figure of 53.6%.
In commenting on the components of the main index, Miller said: “The Business Activity Index remained in expansion territory in May, increasing 1.8 percentage points to 57.7% from April’s reading of 55.9%. The New Orders Index registered 57.3%, 3.8 percentage points above April’s figure of 53.5% and 2.6 percentage points higher than its 12-month average reading of 54.7%. The Employment Index contracted for the third month in a row, with a reading of 47.9%, down 0.1 percentage point from the 48% recorded in April. Of the four subindexes that make up the composite PMI, it is the only one that remains below its 12-month moving average. The Supplier Deliveries Index registered 55.2%, 1.6 percentage points lower than the 56.8% recorded in April. This is the 18th consecutive month that the index has been in expansion territory, indicating slower supplier delivery performance.”
Supplier deliveries is the only ISM PMI Report index that is inverted, as a reading of above 50% indicates slower deliveries, which is typical as the economy improves and customer demand increases.
“The Prices Index increased to 71.3% in May, 0.6 percentage point above April’s figure of 70.7% and recording its highest reading since August 2022, 72.6%,” Miller said. “The index has exceeded 60% for 18 straight months, increasing its 12-month average from 67.7% to 68%. Diesel, gasoline, oil, and related commodities were once again the most frequently mentioned as having risen in price in May. The Inventories Index registered 62.5%, up 9.4 percentage points from April’s 53.1% and equal to May 2010’s highest reading since Services PMI data collection began in 1997. The Inventory Sentiment Index expanded for the 37th consecutive month, registering 55.2%, up only 0.1 percentage point from April’s figure of 55.1%.”
Miller added that the Backlog of Orders Index stayed “in expansion territory for a fourth straight month, registering 51.3% in May, down 1.7 percentage points from the April figure of 53%. This is the index’s third consecutive decrease from February’s reading of 55.9%. The New Export Orders and Imports indexes both remained at 50% or above for the fourth month in a row. The New Export Orders Index decreased by 2.1 percentage points, from 52.1% in April to 50% in May, and the Imports Index registered 51.1%, down 3.6 percentage points from its April reading of 54.7%. Both the New Export Orders and Imports indexes registered above their 12-month moving averages.”
The May Services PMI reading of 54.5% is 1.7 percentage points higher than the 12-month average of 52.8%, Miller noted, with the average up 0.3 percentage point over April’s 12-month average of 52.5%.
“May’s Services PMI is the fifth month in a row with an increase in the 12-month PMI average, up 1.1 percentage points from 51.7% in December 2025 to its current 52.8%, ” Miller said. “The Prices Index increased to 71.3%, its highest reading since August 2022, 72.6%. In this month’s report, petroleum-related products were mentioned as a commodity up in price, a dynamic panelists had not yet reported in April. The Supplier Deliveries Index continued to indicate slower performance. While it eased by dropping 1.6 percentage points in May, its reading of 55.2 is still 2.1 points above its 12-month average. Business activity hit its second-highest reading since achieving the same reading of 57.7% in October 2024, and the New Orders and Supplier Deliveries indexes hit their third-highest readings in that time frame. The Employment index, however, hit its second-lowest reading since September 2025, 0.5 percentage points below its 12-month average.
He said many respondents commented that their companies had instituted hiring freezes or were not backfilling vacated positions. “However, most industries reported that they were holding flat in employment month over month,” Miller said. “Respondents reporting that new orders were higher than last month most frequently attributed this to seasonality. For the third month in a row, no commodities in the report listed as down in price, with multimonth runs of being up in price for aluminum, copper, diesel, gasoline, software licensing and transportation. Although the Inventories index hit its highest level ever, tied with its reading in May 2010, the Inventory Sentiment was only 0.2 percentage point above its 12-month average. Despite the 9.4-percentage point increase in the Inventories Index compared to April, a 0.1 percentage point increase in the Inventory Sentiment Index indicates respondent confidence that business activity will remain strong amid higher costs, so expanding inventories are not of concern.”
The service industries reporting growth in May were: Wholesale Trade; Other Services; Arts, Entertainment & Recreation; Construction; Information; Agriculture, Forestry, Fishing & Hunting; Mining; Professional, Scientific & Technical Services; Public Administration; Accommodation & Food Services; Utilities; Retail Trade; Transportation & Warehousing; Finance & Insurance; Management of Companies & Support Services; Educational Services, and Health Care & Social Assistance. The only service industry reporting a contraction was Real Estate, Rental & Leasing.
The manufacturing industries reporting growth in May were: Printing & Related Support Activities; Textile Mills; Nonmetallic Mineral Products; Paper Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Primary Metals; Miscellaneous Manufacturing; Computer & Electronic Products; Furniture & Related Products; Machinery; Transportation Equipment; Petroleum & Coal Products; Chemical Products; Fabricated Metal Products, and Food, Beverage & Tobacco Products. The sole manufacturing industry reporting contraction was Wood Products.
