ISM Survey: U.S. Service Sector Unexpectedly Contracts in May, Inflation Heats Up

BlockBeats News, June 4th: In May, the U.S. service sector saw its first contraction in nearly a year, with businesses experiencing rising input prices, indicating that the U.S. economy may still face a period of very slow growth and high inflation.

The Institute for Supply Management (ISM) said on Wednesday that the U.S. non-manufacturing PMI fell to 49.9, dropping below the 50 mark for the first time since June 2024, hitting its lowest level. The new order index fell from 52.3 in April to 46.4, possibly due to a weakening boost from tariff-related lead time advantages.

Service sector customers believe that inventories are too high relative to demand, which is not a good sign for short-term economic activity. Supplier delivery performance continued to deteriorate, with extended factory lead times indicating supply chain stress that could drive inflation higher due to supply shortages. Businesses are also seeking to pass on tariffs to consumers. The services input price index surged from 65.1 in April to 68.7, the highest level since November 2022, further reinforcing this trend. Most economists expect the impact of tariffs on inflation and employment to be reflected in the so-called hard economic data in the summer.