US services sector slows in May

The final US services purchasing managers’ index came in at 51.3 in May, up a touch from the flash estimate of 51.2 but down from 52.8 in April.

The reading was only just above the 50 mark that separates contraction from expansion and well below the post-crisis average of 55.6.

Adjusted for seasonal influences, the composite PMI output index dropped to 50.9 in May from 52.4 in April, marking the slowest expansion of private sector output since February.

Markit’s chief economist, Chris Williamson, said: “The service sector reported one of the weakest expansions seen since the recession in May, adding to signs that any rebound of the economy in the second quarter may be disappointingly muted.

“With optimism about the business outlook dropping to a new post-crisis low, companies are expecting conditions to remain challenging in coming months, citing uncertainty about the presidential election as well as broader worries about weak demand at home and abroad.”

Williamson said that when you add these disappointing service sector numbers to the downturn being seen in manufacturing, the PMI surveys point to GDP growing at an annualised rate of just 0.7-8% in the second quarter, notwithstanding any marked change in June.