US services sector activity beats expectations in May

Activity in the US services sector bounced back in May, picking up more than expected, according to survey data released Wednesday.

The services index of the Institute for Supply Management (ISM) rose to 53.8 percent last month, after April's 49.4 percent number.

The latest reading signals that activity is back above the 50-point threshold separating growth from contraction.


The increase "is a result of notably higher business activity, faster new orders growth, slower supplier deliveries and despite the continued contraction in employment," said ISM survey chair Anthony Nieves.

The business activity index was 61.2 percent in May, up from 50.9 percent in April.

New orders jumped as well, although the employment index shrank for the fifth time in six months, the ISM report said.

While respondents said that overall business is growing, challenges in employment remain.

This was mainly due to difficulties in backfilling positions and controlling labor expenses, Nieves added in a statement.

"The majority of respondents indicate that inflation and the current interest rates are an impediment to improving business conditions," he said.

Thirteen industries reported growth including real estate and health care, while five industries reported contractions.

But concerns over the future remain, with one respondent noting: "Recent news of the Biden administration's tariff actions is of high concern on disruption."

The respondent, in the accommodation and food services industry, added that there is "little information on the exclusion process when it comes to which materials and products will actually be impacted."