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Just two days after the Institute for Supply Management reported that manufacturing activity had contracted last month across the country, registering a modest decline of 49.0 (a score of 50.0 is the dividing line between expansion in this industrial category and a contraction in this series), that same Arizona-based trade group reported that the companion non-manufacturing survey had come in with a reading of 53.7.

That result was somewhat better than the 53.1 result totaled in April, and slightly above the 53.5 score that had been the consensus expectation for this sector. Scores here are valued in the same camp as those in manufacturing.

It should be noted that the ISM compiles this diffusion index by surveying almost 400 purchasing managers across the country each month in more than 60 service industries. The responses reflect the change in the current month, in this case May, compared to the previous month.

Breaking the report down to its component parts, we learn that the latest month saw greater strength in production, new orders, supplier deliveries, and inventory sentiment. However, lesser gains were reported in employment, prices, and new export orders last month.

On a comparative basis, May brought data showing employment at its lowest rate of growth since last July and prices at their nadir since June of 2012. On the other hand, new orders were at their best levels since February of this year. Note also that the lone component to suffer a contraction in May was imports.

Taken as a whole, this was the second lowest non-manufacturing result this year, surpassing only the aforementioned 53.1 score in April. Conversely, May came in below the scores of 55.2, 56.0, and 54.4 generated in January, February, and March, respectively. In fact, over the past year, the range of results has been from 52.7 to 56.0, with an average score of 54.4. Thus, it can be seen that this result, while better than in the prior month and slightly above expectations, was not especially welcoming, nor was it a game changer for the economy or, we sense, for the Federal Reserve.   

At the time of this article's writing, the author did not have positions in any of the companies mentioned.