ISM Nonmanufacturing Report Refutes Weak ADP Payroll Trends for May

After a weak jobs report from ADP, a report from the Institute for Supply Management (ISM) is signaling that the U.S. economy and jobs market remained healthy in May. The ISM showed that economic activity in the nonmanufacturing sector, which is of course now the bulk of the U.S. economy, grew in May for the 112th consecutive month.

May’s reading came to 56.9%, higher than the 55.0% expected by Dow Jones and the 55.5% for April.

The ISM showed that its Business Activity Index came in at 61.2% (compared with 59.5% in April) and the New Orders Index came in at 58.6% (versus the 58.1% prior reading).

Its Employment Index also came in at 58.1%, up from just 53.7% in April, a reversal of the ADP payrolls report showing much weaker hiring trends outside of the companies with 1,000 or more employees. Twelve industries reported an increase in employment in May, and employment activity in the nonmanufacturing sector as a whole grew in May for the 63rd consecutive month.

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According to the ISM, May’s gains represented continued growth in the non-manufacturing sector and growth at a slightly faster rate. General business activity reflected growth for the 118th consecutive month.

Other portions of the ISM nonmanufacturing data showed some mixed to positive readings. Sixteen nonmanufacturing industries reported growth in May, with only one industry (classified as Agriculture, Forestry, Fishing & Hunting) reporting a decrease.

The Prices Index decreased from the April reading of 55.7% to 55.4%, indicating that prices increased in May for the 24th consecutive month.

Supplier deliveries (49.5%) contracted in May for the first time since December of 2015 (48.5%), and May’s reading was one percentage point lower than the 50.5% registered in April.

This one statement would sum up this report:

The non-manufacturing sector continues to experience a slight uptick in business activity, but it is still leveling off overall. Respondents are mostly optimistic about overall business conditions, but concerns remain about tariffs and employment resources.

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