The ISM survey of business activity in the services, construction, and government sectors of the economy fel in May, suggesting growth decelerated modestly. New orders, which hit cycle high in April, fell with the index now just above November's level and below the 3- and 6-month averages. New export orders decelerated particularly sharply. Employment was strong, in contrast to Friday's payroll employment data and suggesting some potential for upward revisions to the May data. Prices fell, with the index below 50, for the first time since February 2016. Overall, the index non-manufacturing activity suggest growth is still solid with the index just above its average level for the last 3- and 6-months and well above 2016's average.
The ISM Non-Manufacturing Index
FELL by 0.6 points in May to 56.9%, compared with market expectations for a larger decline to 57.1%. The May reading was slightly higher than its average level over the past 12 months. And the current level of the index indicates that the economy is growing moderately.
fell by -5.5 points to 57.7%. Order Backlogs
increased modestly and Inventories increased modestly.
grew by 6.4 points to 57.8%, somewhat contrary to Friday's payroll report.
fell by 8.4 points to 49.2%.
Quotes from Survey Respondents:
- "Lumber tariff effects are beginning to show up." (Construction)
- "Business is progressing steadily. No real issues or adjustments to affect annual goals/efforts." (Finance & Insurance)
- "General feeling is caution. Too much uncertainty." (Health Care & Social Assistance)
- "Seeing an uptick in the overall activity within the oil and gas sector, which typically will cause a trickle-down effect on the majority of businesses." (Mining)
- "Typical transition month in terms of fresh produce and other food related categories. End of spring items and beginning of summer. Gapping of some items. Beef is increasing in price, especially grilling meat cuts. I anticipate this to increase to over $1 per pound on some items as we approach the 4th of July holiday." (Accommodation & Food Services)
- "Continuing to feel [the] effect of overheated commercial construction market - few bidders, higher prices. Scarce construction labor seems to be the driver." (Public Administration)
- "Business outlook continues to be steady and meeting original projects, but some ups and downs in successive months." (Professional, Scientific & Technical Services)
- "Overall, business conditions the past month were flat as compared with several months of growth. While levels haven’t decreased, it may be that overall conditions have reached a high watermark." (Retail Trade)
- "Strong market conditions bring a renewed confidence." (Transportation & Warehousing)