May services sector expands for 23rd consecutive month
Economic activity in the services sector continued to expand in May, according to the latest ISM Services PMI Report. The Services PMI registered 54.5%, the 23rd consecutive month in expansion territory.
The report was issued June 3 by Steve Miller, CPSM, CSCP, chair of the Institute for Supply Management (ISM) Services Business Survey Committee: “In May, the Services PMI registered 54.5%, an increase of 0.9 percentage point compared to April’s figure of 53.6%. The Business Activity Index remained in expansion territory in May, increasing 1.8 percentage points to 57.7% from April’s reading of 55.9%. The New Orders Index registered 57.3%, 3.8 percentage points above April’s figure of 53.5% and 2.6 percentage points higher than its 12-month average reading of 54.7%. The Employment Index contracted for the third month in a row with a reading of 47.9%, a 0.1-percentage point decrease from the 48% recorded in April; of the four subindexes that make up the composite PMI, it is the only one that remains below its 12-month moving average,” says Miller.
“The Supplier Deliveries Index registered 55.2%, 1.6 percentage points lower than the 56.8% recorded in April. This is the 18th consecutive month that the index has been in expansion territory, indicating slower supplier delivery performance. (Supplier Deliveries is the only ISM PMI Reports index that is inversed; a reading of above 50% indicates slower deliveries, which is typical as the economy improves and customer demand increases.)
“The Prices Index increased to 71.3% in May, 0.6 percentage point above April’s figure of 70.7% and recording its highest reading since August 2022 (72.6 percent). The index has exceeded 60% for 18 straight months, increasing its 12-month average from 67.7% to 68%. Diesel, gasoline, oil and related commodities were once again most frequently mentioned as up in price in May.
“The Inventories Index registered 62.5%, up 9.4 percentage points from April’s figure of 53.1% and equaling May 2010 as its highest reading since Services PMI® data collection began in 1997. The Inventory Sentiment Index expanded for the 37th consecutive month, registering 55.2%, up only 0.1 percentage point from April’s figure of 55.1%. The Backlog of Orders Index remained in expansion territory for a fourth straight month, registering 51.3% in May, down 1.7 percentage points from the April figure of 53 percent; this is the index’s third consecutive decrease from February’s reading of 55.9%. The New Export Orders and Imports indexes both remained at 50% or above for the fourth month in a row. The New Export Orders Index decreased by 2.1 percentage points from 52.1% in April to 50% in May, and the Imports Index registered 51.1%, a decrease of 3.6 percentage points compared to its April reading of 54.7%. Both the New Export Orders and Imports indexes registered above their 12-month moving averages.
“Seventeen industries reported growth in May, three more than in April, and the number reporting contraction dropped to one, a decrease of two from April. The May Services PMI® reading of 54.5% is 1.7 percentage points above the 12-month average of 52.8%. That average is an uptick of 0.3 percentage point over April’s 12-month average of 52.5 percent.”
Miller continues, “May’s Services PMI is the fifth month in a row with an increase in the 12-month PMI average, up 1.1 percentage points from 51.7% in December 2025 to its current 52.8%. The Prices Index increased to 71.3%, its highest reading since August 2022 (72.6 percent). In this month’s report, petroleum-related products were mentioned as a commodity up in price, a dynamic panelists had not yet reported in April. The Supplier Deliveries Index continued to indicate slower performance; while it eased by dropping 1.6 percentage points in May, its reading of 55.2 is still 2.1 points above its 12-month average.
“Business activity hit its second highest reading since achieving the same reading of 57.7% in October 2024, and the New Orders and Supplier Deliveries indexes hit their third highest readings in that time frame. The Employment index, however, hit its second lowest reading since September 2025, 0.5 percentage point below its 12-month average. Respondents commented frequently that their companies had instituted hiring freezes or were not backfilling vacated positions, however, most industries reported that they were holding flat in employment month over month. Respondents reporting that new orders were higher than last month most frequently attributed this to seasonality.
“For the third month in a row, no commodities in the report listed as down in price, with multimonth runs of being up in price for aluminum, copper, diesel, gasoline, software licensing and transportation. Although the Inventories index hit its highest level ever, tied with its reading in May 2010, the Inventory Sentiment was only 0.2 percentage point above its 12-month average. Despite the 9.4-percentage point increase in the Inventories Index compared to April, a 0.1 percentage point increase in the Inventory Sentiment Index indicates respondent confidence that business activity will remain strong amid higher costs, so expanding inventories are not of concern.”
INDUSTRY PERFORMANCE
The 17 services industries reporting growth in May — listed in order — are: Wholesale Trade; Other Services; Arts, Entertainment & Recreation; Construction; Information; Agriculture, Forestry, Fishing & Hunting; Mining; Professional, Scientific & Technical Services; Public Administration; Accommodation & Food Services; Utilities; Retail Trade; Transportation & Warehousing; Finance & Insurance; Management of Companies & Support Services; Educational Services; and Health Care & Social Assistance. The only industry reporting a contraction in the month of May is Real Estate, Rental & Leasing.
INDUSTRIAL SUPPLY MAGAZINE
The May/June issue of Industrial Supply magazine features an in-depth cover story about GHX Industrial. Plus, we're featuring articles by contributing writers Dr. Bharani Nagarathnam and Frank Hurtte, as well as interviews with numerous product and distribution industry experts.
