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U.S. service sector growth unexpected reaccelerates in May

Christian Fernsby |
Indicating an unexpected acceleration in the pace of U.S. service sector growth in the month of May, the Institute for Supply Management released a report showing an increase by its non-manufacturing index.

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The ISM said its non-manufacturing index climbed to 56.9 in May after falling to 55.5 in April, with a reading above 50 indicating growth in service sector activity.

The increase by the non-manufacturing index came as a surprise to economists, who had expected the index to come in unchanged from the previous month.

"The non-manufacturing sector continues to experience a slight uptick in business activity, but it is still leveling off overall," said Anthony Nieves, Chair of the ISM Non-Manufacturing Business Survey Committee.

He added, "Respondents are mostly optimistic about overall business conditions, but concerns remain about tariffs and employment resources."

The unexpected increase by the headline index was partly due to a notably faster rate of job growth in the service sector, with the employment index surging up to 58.1 in May from 53.7 in April.

The business activity index also rose to 61.2 in May from 59.5 in April, while the new orders index inched up to 58.6 from 58.1.

On the other hand, the report said the prices index edged down to 55.4 in May from 55.7 in April, indicating a slightly slower rate of price growth.

The ISM released a separate report on Monday showing the pace of growth in U.S. manufacturing activity unexpectedly saw a continued slowdown in the month of May.

The purchasing managers edged down to 52.1 in May from 52.8 in April, dropping to its lowest level since hitting 51.7 in October of 2016.

While a reading above 50 still indicates growth in the manufacturing sector, economists had expected the index to inch up to 53.0.

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