US service sector activity grew strongly in May due to new orders

Economy and stock exchange

The service sector in the United States grew at a strong pace in May, hiring more workers, providing a breathing space for a slowing economy following a temporary export boost and stock build-up in the first quarter.

The survey by the Institute of Supply Management on Wednesday, following a series of weak reports on consumer spending, housing and manufacturing, indicated a sharp loss of economic growth momentum in the early second quarter.

Slow growth, worsening trade tensions between the United States and China, and projected US tariffs on imports from Mexico, prompted some economists to expect a cut in US interest rates this year.

The Institute for Supply Management said its index of non-manufacturing activity rose 1.4 points to 56.9 in May, and any reading above the 50 per cent in the services sector, which accounts for more than two-thirds of US economic activity. Economists forecast in a Reuters poll that there was no change in the index from the previous month, which recorded 55.5.

The increase in service sector activity in May was due to a jump in the sub-index of 1.7 points, and the activity of the new supply orders index also contributed to the activity. The services sector's employment index rose 4.4 points to its highest level in seven months.

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