New orders increase, but companies still complain about prices
By Jeffry Bartash, MarketWatch
WASHINGTON (MarketWatch) — The U.S. services sector grew at slightly faster pace in May compared to the prior month, according to a survey of senior executives.
The Institute for Supply Management on Friday said its services index rose to 54.6% last month from 52.8% in April. Readings over 50% indicate more firms are expanding than contracting
Economists surveyed by MarketWatch expected the services index to rise to 54.0%.
“Respondents’ comments are mostly positive about overall business conditions,” said Anthony Nieves, who directs the ISM services survey.
The increase in the ISM’s service index bucked the prevailing trend in economic data. Most indicators have turned lower over the past month.
The positive ISM report did nothing to alter the sour mood of investors. U.S. stocks fell sharply Friday after the monthly employment report for May showed that the economy added a scant 54,000 jobs. R ead MarketWatch report on job growth.
The service sector is composed of fields such as health, finance and entertainment and accounts for three-fourths of all U.S. economic activity. It also employs about 80% of the nation’s workers.
The new orders component of the ISM services report rose 4.1 percentage points to 56.8%. The employment index climbed 2.1 percentage points to 54.0%. The production index was basically flat at 53.6%.
Sixteen of the 18 service sectors tracked by ISM reported growth, led by mining, utilities and arts and entertainment. The only sectors to contract were educational services and retail trade.
Once again, service companies said their biggest concern was the high cost of fuel and other commodities. The prices paid index remained high at 69.6%, down slightly from 70.1% in the prior month.
“Uncertainty within commodity markets, especially fuel- and oil-based products, is putting pressure once again and forcing us to retrench as we look for stability,” an executive at a retailer said. “We expect the remainder of 2011 and at least the first two quarters of 2012 to be tumultuous.”
The ISM began publishing its service gauge in 2008, but it’s been compiling the data since 1998 as part of a broader index measuring growth in the U.S. economy.
