Activity in US services sector accelerates in May, but slips in manufacturing

Services sector activity in the US picked up by surprise last month, even as that in manufacturing shrank unexpectedly, the results of two surveys revealed.

S&P Global's services sector Purchasing Managers' Index increased from a reading of 53.4 for April to 55.1 in May.

That was noticeably better than economists' forecast for a reading of 52.6.

But a separate PMI for factory activity fell from 50.2 to 48.5 (consensus: 50.0).

A gauge tracking output from both sectors turned higher as well, rising from 53.4 to 54.5 - a 13-month high.

Total new orders grew for a third successive month, rising at their fastest clip in a year.

In manufacturing on the other hand, new orders declined at their steepest pace since February, the survey compiler said.

Factories did record the first drop in input prices in three years, but those in services registered a marked increase, albeit at the slowest pace for five months.

On the employment front, hiring remained "solid" in May, S&P Global said.

Commenting on the latest survey results, Chris Williamson, chief business economist at S&P Global, said: The US economic expansion gathered further momentum in May, but an increasing dichotomy is evident.

While service sector companies are enjoying a surge in post-pandemic demand, especially for travel and leisure, manufacturers are struggling with over-filled warehouses and a dearth of new orders as spending is diverted from goods to services."