Similar to the ISM Manufacturing report which bounced back from two straight months of m/m declines, the ISM Non-Manufacturing report also rebounded in May, erasing a three-month streak of losses.  While economists were forecasting the headline index to come in at 57.7, the actual reading was much stronger at 58.6.  With the strong readings in both the Manufacturing and Non-Manufacturing reports, the combined ISM for the month of May also rebounded to 58.6 from 56.9.  While both of these series are off of their recent highs, they are still high relative to history and trending in the right direction.

Looking at the details of this month’s report, breadth was strong.  On a month/month basis, the only two components that declined were Export Orders and Import Orders.  Of the eight components that saw increases, the biggest gainers were Backlog Orders and Supplier Deliveries.  Breadth on a y/y basis was also strong as the only two components that declined were Inventory Sentiment and Employment.

Two sectors worth attention this month were Prices Paid and Backlog Orders.  As shown in the first chart, while Prices Paid is still off of its highs from last September, it has begun to turn higher again.

Backlog Orders surged this month to their highest level on record, which could be indicative of further pricing pressures ahead.  In fact, this month’s 8.5 point increase in that component was the largest m/m increase since March 2010.

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