ISM Service Sector Report Shows Growth, With Concerns On Trade Outlook

Higher costs tied to tariffs and the shifting outlook for trade are central concerns of ISM's non-manufacturing sample which once again shows month-to-month growth across all 18 sectors tracked. May's composite index came in at the high-end of Econoday's consensus range, at 58.6 for a sizable 1.8 point gain from April. The component giving the biggest lift in May is delivery time which lengthened sharply to indicate rising congestion in the supply chain. Shortages in the transportation sector, including for truck drivers, are cited.

Labor shortages are also cited in construction, one sector that this report covers that isn't covered by PMI services, released earlier this morning and showing similar strength. Mining is the second sector not covered in the PMI services report and this sector is the leading one in today's ISM.

Rising backlogs are a consistent theme of all the small sample surveys including today's ISM as are rising input costs, both showing strong acceleration at already unusually high levels. Inventories are also rising and business activity is up. With tariffs in effect and trade questions in the background, May was a very strong month for the U.S. economy based on the host of small-sample surveys.