June 5, 2017 – The ISM Non-Manufacturing Index helps determine overall conditions in the services sector. Components evaluated are employment, business activity, new orders, and supplier deliveries. The nonmanufacturing sector represents a much larger share of the overall U.S. economy when compared to the manufacturing sector, making up approximately 80%. Readings above 50 indicate an expansion while readings below 50 signal decline.
The ISM non-manufacturing index came in just below the consensus of 57 at 56.9 and below the previous month of 57.5. New orders came in 5.5 points lower month-over-month at 57.7. The employment index rose 6.4 points from April to May at 57.8. Business activity was at 60.7, down from 62.4. Non-manufacturing prices and imports are contracting but every other area is growing.
The index has now expanded for 89 consecutive months and we expect that to continue. 17 of the 18 industries reported growth in May. While growth was weaker, it continues to look promising trending well above 50 for the past year. It is important to keep in mind that the non-manufacturing index is a survey of over 400 firms rather than hard data on the economic environment. This is reflected in the growth of the employment index but payrolls and hires falling short.