ISM services back to the flat line

The May ISM services index, more comprehensive than the one from S&P Global because it includes key sectors like retail and construction that S&P does not, fell to 49.9 from 51.6. This is the weakest print since June 2024. The Business Activity component fell to exactly 50 from 53.7 in April and 55.9 in March.

Of particular note in this survey was the 5.9 pt drop in new orders to 46.4. That’s the lowest since December 2022. Backlogs dropped by 4.6 pts to just 43.4. August 2023 was the last time something was weaker. After a buildup in April to 53.4, inventories fell to 49.7. Export orders were little changed while imports rose to 3.9 pts to 48.2 but after falling by 8.3 pts last month.

With all eyes on the supply chain and prices, Supplier Deliveries rose 1.2 pts to 52.5 (higher figure means slower deliveries) and that is just above the 6 month average of 52.2. Prices paid were up another 3.6 pts to 68.7, the highest since November 2022. Sixteen industries paid higher prices vs 17 in the month before and 14 in March.

Employment, post ADP and pre BLS, rose 1.7 pts to back above 50 at 50.7, about right in line with the 6 month average but only 7 industries reported higher employment vs 8 last month.

With new orders, ISM said, “Normal seasonal business, but overall volumes for the year are down” and “While inquiries have been coming, no action has been taken to close deals.”