May PMI service eases as lockdown lifts, ISM service continues to shrink

U.S. service providers indicated a further significant, albeit softer, contraction in business activity in May, as the impact of the coronavirus disease 2019 (COVID-19) continued to dampen client demand. At the same time, new order inflows declined at a slower rate than in April, despite domestic and foreign demand remaining subdued. Consequently, companies cut jobs at a considerable pace, and one that was only slightly slower than April's recent record. The reduction in employment partially stemmed from pessimism among firms towards the outlook for activity over the next year, as extreme levels of business uncertainty weighed on confidence.  

In an effort to boost sales, firms reduced their selling prices further. The drop in output charges was aided by lower cost burdens. 

The seasonally adjusted final IHS Markit US Services Business Activity Index registered 37.5 in May, up from April's record low of 26.7 and slightly higher than the ‘flash’ figure of 36.9. The rate of reduction in activity softened notably amid some reports of businesses returning to work, but was nonetheless the second-sharpest since data collection began in October 2009. The decrease in service sector output was widely linked to emergency public health measures introduced to stem the spread. Stay-at-home measures and social distancing presented challenges to business reopening, especially those who focus on customer-facing services. 

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Economic activity in the non-manufacturing sector contracted in May for the second consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM^® Report On Business^®.

The report was issued today by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management^® (ISM^®) Non-Manufacturing Business Survey Committee: “The NMI^® registered 45.4 percent, 3.6 percentage points higher than the April reading of 41.8 percent. This reading represents contraction in the non-manufacturing sector for the second consecutive month, following a 122-month period of expansion. The Business Activity Index increased 15 percentage points from April’s figure, registering 41 percent. The New Orders Index registered 41.9 percent; 9 percentage points higher than the reading of 32.9 percent in April. The Employment Index increased to 31.8 percent; 1.8 percentage points higher than the April reading of 30 percent.