US services sector activity accelerated in May, providing fresh evidence that the economy remains resilient despite elevated interest rates. ISM Services PMI rose from 53.6 to 54.6, beating expectations and marking one of the strongest readings of the past year. Business activity increased from 55.9 to 57.7, while new orders climbed sharply from 53.5 to 57.3, signaling healthy demand across the sector. Seventeen industries reported growth during the month, up from fourteen in April, while only one industry reported contraction.
The report also pointed to a broadening expansion in economic activity. Historically, a Services PMI reading of 54.6 is consistent with roughly 2% annualized real GDP growth, suggesting the US economy continues to expand at a solid pace. The strength in business activity and new orders stands in sharp contrast to recent surveys from Europe, where PMIs have increasingly pointed toward contraction and recession risks.
For markets and policymakers, however, the most notable detail may have been inflation. The prices-paid component rose from 70.7 to 71.3, its highest level since August 2022. Meanwhile, employment remained soft at 47.9, down from 48.0, indicating businesses are meeting demand through productivity gains rather than aggressive hiring.
| Indicator | April | May | Expectation |
|---|---|---|---|
| ISM Services PMI | 53.6 | 54.6 | 53.6 |
| Business Activity | 55.9 | 57.7 | — |
| New Orders | 53.5 | 57.3 | — |
| Employment | 48.0 | 47.9 | — |
| Prices Paid | 70.7 | 71.3 | — |
