A nationwide survey of the services, construction, and financial industries remained in contraction for the eighth straight month in May, but the pace of contraction was the slowest in seven months. The ISM Non-Manufacturing Index moved up a minor 0.3 points to 44.0, a point lower than analyst expectations, but a move towards stabilization nonetheless.
Details of the report were mixed but appear a bit worse than the headline. Deterioration was seen New Orders (down 2.6 points to 44.4), Production (down 2.8 points to 42.4), Exports (down 1.5 points to 47.0) and Imports (down 2.5 points to 46.0).
Employment improved 2 points to 39.0, but that’s still a far cry from the 50 level needed to indicate overall expansion.
Anthony Nieves, who chairs the survey, said comments from executives were mixed across different sectors. “Some respondents indicate that there are signs of stabilization, while others continue to have a negative outlook on the economy," he said.
The biggest monthly move was in the prices index, which jumped 6.9 points in the month to 46.9. Prices have been deflating for seven straight months.
Six of the 17 industries covered reported growth in May, with Real Estate leading the way, followed by Rental & Leasing; Arts, Entertainment & Recreation; Utilities; Retail Trade; Construction; and Accommodation & Food Services.
The 11 industries reporting continued slowdown were: Other Services; Mining; Educational Services; Management of Companies & Support Services; Wholesale Trade; Finance & Insurance; Public Administration; Agriculture, Forestry, Fishing & Hunting; Transportation & Warehousing; Health Care & Social Assistance; and Information.
Charmaine Buskas, senior strategist at TD Securities, said the decline in New Orders suggests the “global economy remains under pressure” and it will be some time before genuine recovery takes place.
Markets appear to agree. The S&P 500 sank right at 10 am, and one hour into the trading session the index remains down 1.56% on the day.