Wednesday’s ISM Non-Manufacturing (Services) report for the month of May came in weaker than expected falling from 57.8 down to 55.7 compared to expectations of 57.0. This was the lowest monthly reading for the headline index since April 2014 and raises concerns that what had been a relative bright spot for the economy is starting to show cracks, even as the weather improves. Combining the ISM Services with the ISM Manufacturing report and accounting for each sector’s share of the overall economy, the combined ISM for the month of May fell to 55.3 from 57.0.
The table below breaks down the monthly and yearly change in each of the ISM Non-Manufacturing Index’s subcomponents. Breadth in this month’s report was pretty weak. Of the ten subcomponents, just three increased while six declined (Inventories were unchanged). The biggest increases in this month’s report were Export Orders and Prices while Backlog Orders and Supplier Deliveries saw the largest declines. In the case of Prices, this month’s increase was the largest monthly jump since August 2012. This come on the heels of Monday’s ISM Manufacturing report where the Prices Paid component also saw its largest monthly increase since August 2012. Employment, which is of particular interest ahead of Friday’s employment report only saw a small decline, so that doesn’t present much in the way of red flags regarding Friday’s report. While breadth on a month/month basis was weak, on a year/year basis it was even weaker as just two components are higher on a year/year basis.