US services data sends mixed signals as S&P Global PMI stalls, ISM survey strengthens

(Sharecast News) - Two key gauges of US services activity painted a contrasting picture in May, with the S&P Global survey pointing to a near‑stall in private‑sector growth, while the Institute for Supply Management's services PMI showed the sector expanding at its fastest pace in three months - underscoring an economy still grappling with elevated price pressures, softening demand and uneven momentum across industries.

US services activity slowed to a near‑stall in May, according to the latest S&P Global purchasing managers index, which pointed to only marginal growth across the private‑sector economy as rising fuel and energy costs continued to squeeze demand.

The headline US services PMI slipped to 50.7 from 51.0 in April, remaining just above the 50 no‑change mark but signalling one of the weakest expansions in more than two years. Softer activity was linked to higher operating costs and subdued new‑business inflows, with firms reporting that rising prices were constraining client budgets. Export demand also weakened, falling at its sharpest rate since late 2022.

Business confidence deteriorated to its lowest level since October 2022 amid uncertainty over inflation and the broader economic outlook. That caution fed through to the labour market, with service‑sector employment falling at the steepest pace since May 2020 as firms held back on hiring.

Price pressures remained historically elevated, driven by higher fuel and energy costs. Input‑cost inflation hit a five‑month high, prompting companies to raise selling prices at a slightly faster rate. Despite a modest pickup in new‑business inflows, overall sales growth remained well below long‑run trends, and firms continued to cite economic and trade‑policy uncertainty as a drag on demand.

As a result, S&P Global's composite PMI decreased to 51.50 points in May, down from 51.70 points in April.

Elsewhere, the Institute for Supply Management's services rose to 54.5 from 53.6 in April - marking a 23rd straight month of growth. Business activity strengthened, with the index climbing to 57.7, while new orders accelerated sharply to 57.3, well above both April's reading and the 12‑month average.

Employment, on the other hand, remained a weak spot, with the jobs index contracting for a third consecutive month, edging down to 47.9 to be the only major component sitting below its 12‑month trend. Supplier deliveries continued to lengthen, now sitting at 55.2, pointing to slower delivery times for the 18th month in a row.

Price pressures remained elevated, with the prices‑paid index rising to 71.3, its highest since August 2022, with respondents again citing higher diesel, gasoline and oil costs. Inventories jumped to 62.5, matching a record high, while inventory sentiment remained firmly in expansion territory.

Backlogs, export orders and imports all held above the 50 mark, though growth in each softened, whilt the backlog index eased to 51.3, export orders slipped to 50, and imports moderated to 51.1.

Reporting by Iain Gilbert at Sharecast.com