The Institute for Supply Management (ISM), the Tempe, Arizona-based trade group that compiles data on both the manufacturing sector and the non-manufacturing category, reported on activity in the latter area within the past hour, and noted that business activity there had increased once again last month.
In all, the non-manufacturing sector registered a survey reading of 53.7, a full 3.7 points above the line separating an expanding level of activity from one that is contracting. The result also was a tad better than the 53.5 result recorded in April and the May expectation of 53.5. On Friday, a day that saw the nation confirm that it added just 69,000 jobs in May, we also saw the ISM report on manufacturing issued and come in shy of expectations, recording a May result of 53.5 down from the prior-month gauge of 54.8. This time, however, the non-manufacturing area, which takes in the consumer sector, did a little better than forecast.
Breaking the report down further we find that new orders perked up nicely, rising from 53.5 in April to 55.5 in May. Similarly, we saw improvement in inventory sentiment and supplier deliveries. On the other hand, growth lessened, but remained in place, in exports and employment, and flattened out on the backlog front. Meanwhile, prices fell, registering an outright decline at 49.8 from 53.6 the month before.
Looking at the report from the perspective of the purchasing managers themselves, the survey noted that construction executives reported that the second quarter would likely be a stronger one for them, which is somewhat surprising given the beleaguered state of the U.S. housing market. Also, there was better sentiment in the finance arena and the insurance sector, as well as within the arts and entertainment category.
Overall, the report was decent and, as affirmed, somewhat better than forecast. This last point is especially welcome, as most of the metrics issued over the past several weeks have been worse than expected, headlined by last week's dour employment report. This survey does help to confirm our view that the nation's economic expansion, while showing generally unprepossessing characteristics, is not likely to contract in the aggregate anytime soon, as we now expect to be the case in the euro zone in the current quarter and through the opening part of the second half--at least.