Activity in the services sector has fallen into contraction for the first time in a year.
The Institute for Supply Management’s Services PMI registered a reading of 49.9 in May, below the 51.6 seen in April and lower than the increase to 52 economists had expected. Readings above 50 for this index indicate an expansion in activity, while readings below 50 indicate contraction. May’s data marked just the fourth time the services sector has fallen into contraction in the past five years.
New orders tumbled to a reading of 46.4 in May, below the 52.3 seen the month prior. Meanwhile, the prices paid index increased to 68.7, up from 65.1 in April. This marked the highest prices paid reading since November 2022, when the Consumer Price Index had shown inflation at 7.1%.
Steve Miller, the chair of ISM’s Services Business Survey, said in the release that “tariff impacts are likely elevating prices paid.”
“May’s PMI level is not indicative of a severe contraction, but rather uncertainty that is being expressed broadly among ISM Services Business Survey panelists,” Miller said.
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