The latest data from the Institute for Supply Management (ISM) has revealed that economic activity in the services sector contracted in May, with the ISM® Services index dropping to 49.9% from 51.6% in the previous month. This marks the first contraction since June 2024, highlighting a potential slowdown in the industry.
Despite the overall decrease in the Services PMI®, there were some positive signs within the report. The employment index increased to 50.7%, indicating expansion in the job market after two months of contraction. However, the New Orders Index fell into contraction territory at 46.4%, down from 52.3% in April, suggesting a decrease in demand for services.
One notable aspect of the report was the Prices Index, which registered at 68.7% in May, a significant increase from the previous month. This surge in prices paid by services sector companies could be attributed to tariff impacts and supply chain disruptions, posing challenges for businesses operating in the sector.
According to Steve Miller, Chair of the ISM Services Business Survey Committee, the May PMI® level does not signify a severe contraction but rather reflects the uncertainty prevailing among survey panelists. The average reading over the last three months still indicates expansion, albeit at a slightly lower level compared to the previous nine months.
The report also highlighted that ten industries reported growth in May, although this was lower than the eleven industries in April. This fluctuation in industry performance underscores the ongoing challenges and uncertainties faced by businesses in the services sector.
Overall, the latest ISM® Services index data points to a mixed outlook for the services industry, with signs of both expansion and contraction. The impact of global economic conditions, supply chain disruptions, and pricing pressures are likely to continue influencing the sector in the coming months.
References:
– Calculated Risk. (n.d.). ISM® Services Index decreased to 49.9% in May. Retrieved from https://www.calculatedriskblog.com/2025/06/ism-services-index-decreased-to-499-in.html
– ReinsuranceNe.ws. (n.d.). MGAs’ premiums increased 15% to $89.9bn in 2024: AM Best. Retrieved from https://www.reinsurancene.ws/mgas-premiums-increased-15-to-89-9bn-in-2024-am-best/
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