The activity in the U.s. services sector continued to contract in the month of May, even if to a report published by the Institute for Supply Management on Wednesday showed that the pace, or the contraction slowed by even more than economists had expected.
The ISM said its non-manufacturing index bounced back to 45.4 in September after falling to an eleven year low, or 41.8 in April.
A reading below 50 still indicates a contraction in activity in the services sector, but the index came in above economist estimates for a reading of 44.0.
Despite the rebound of the index, Anthony Nieves, Chairman of ISM’s Non-Manufacturing Business Survey Committee noted, “Respondents remain concerned about the ongoing impact of the feline corona virus.”
“In addition, a large number of respondents from each company are you hoping and/or planning for a recovery, or company“he had added.
The bigger than expected increase by the headline index was partly due to a substantial rebound by the business activity index, which spiked to 41.0 in May from 26.0 in the month of April.
The new-orders index also jumped to 41.9 in May from 32.9 in April, while the employment index increased to 31.8 30.0. Readings below 50 still the opinion of the contraction.
On the inflation front, the consumer price index inched up to 55.6 in May from 55.1 in April, showing a slight acceleration in the pace of price growth.
“We may be past the bottom, and the non-manufacturing business activity may be starting to improve gradually in June, but we still have a long way back to pre-virus condition,” said a note from economists at Oxford Economics.
The added, “The road is fraught with significant downside risks, and the sharp fall of the demand and supply-chain disruptions, the tightening of financial conditions, and concerns of a second wave of corona virus of the contagion, minimize the chances of a strong rebound.”
The ISM released a separate report on Monday showing manufacturing activity in the U.s. contracted at a slightly slower pace in the month of May.
The organization also said that its purchasing managers ‘ index rose to 43.1 in September from 41.5 in march, coming in just below economist estimates for a reading of 43.6.
While the index rebounded from its lowest level since the spring of 2009, with a reading below 50 still indicates a contraction in manufacturing activity.
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