Home Logon FTA Investment Managers Blog Subscribe About Us Contact Us

Search by Ticker, Keyword or CUSIP       

Blog Home
   Brian Wesbury
Chief Economist
X •  LinkedIn
   Bob Stein
Deputy Chief Economist
X •  LinkedIn
  The ISM Non-Manufacturing Index Slowed to 55.9 in May
Posted Under: Data Watch • Employment • Government • Inflation • ISM Non-Manufacturing • Spending • COVID-19
Supporting Image for Blog Post

Implications:  The service sector continued to expand in May although at a slower pace than in April, with the headline service-sector index declining to 55.9 from 57.1.  Were it not for supply-chain disruptions lingering from COVID as well as inflationary headwinds, the service sector would be doing even better.  One comment in May's report summed it up by describing the current environment as, "Exhausting. Continuous shortages, transportation delays and price increases all contribute to the destruction of historical lead times and firm commitments on delivery dates... It is relentless."  This is what happens when you add money to the system at a faster pace than you can grow output.  Until the Federal Reserve gets money growth under control, these problems are here to stay.  That said, the service sector still expanded at a healthy clip in May, with fourteen of eighteen industries reporting growth, and should benefit this year as consumers shift their spending preferences away from expensive goods and towards the still-recovering service sector.  Looking at the details of the report, business activity and new orders – the two most forward-looking indices – were mixed in May, but both stand comfortably above 50, signaling growth.  Meanwhile, there was improvement in the labor market, as the employment index moved back into expansion territory.  This helped pushed the index for supplier deliveries (a measurement of lead times for businesses) down to 61.3, which remains well off its recent peak of 75.7 set back in late 2021.  Finally, the highest reading for any category continues to come from the prices index, even though it fell a couple points from its all-time high set last month.  This decline should fool no one – prices are continuing to rise in the service sector, and at a historically fast pace. All 18 industries reported paying higher prices in May, while forty-five commodities were listed up in price, and only two (copper and steel products) were reported down.  In other recent news, data out earlier this week showed that car and light truck sales fell 12.5% in May to a 12.7 million annual rate.  The key impediment to auto sales remains supply constraints, largely related to a lack of computer chips.  Look for that problem to ease in the second half of 2022, resulting in a faster pace of sales.

Click here for a PDF version
Posted on Friday, June 3, 2022 @ 1:15 PM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
Follow First Trust:  
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2024 All rights reserved.