Growth in the U.S. service sector continued at a slightly faster rate in the month of May, according to a report released by the Institute for Supply Management on Wednesday.
The ISM said its non-manufacturing index edged up to 53.7 in May from 53.1 in April, with a reading above 50 indicating growth in the service sector. Economists had expected the index to climb to 53.5.
Anthony Nieves, chair of the ISM Non-Manufacturing Business Survey Committee, said, "According to the NMI, 13 non-manufacturing industries reported growth in May."
"The majority of respondents' comments are optimistic about business conditions," he added. "However, there is a degree of uncertainty about the long-term outlook."
The increase by headline index came as the business activity index climbed to 56.5 in May from 55.0 in April, while the new orders index rose to 56.0 from 54.5.
On the other hand, the employment index dipped to 50.1 in May from 52.0 in April, indicating a slowdown in the pace of job growth in the service sector.
The prices index also edged down to 51.1 in May from 51.2 in April, with the drop suggesting a slight slowdown in the pace of price growth.
Paul Dales, Senior U.S. Economist at Capital Economics, said the small increase by the ISM's non-manufacturing index is a relief coming after the sharp drop by the association's reading on activity in the manufacturing sector.
On Monday, the ISM said its index of activity in the manufacturing sector fell to 49.0 in May from 50.7 in April, with a reading below 50 indicating a contraction in activity. Economists had expected the index to inch up to a reading of 51.0.
With the unexpected decrease, the manufacturing index indicated a contraction for the first time since November of 2012 and fell to its lowest level since June of 2009.
Dales said, "With households' finances improving and the housing recovery well entrenched, we expect that the retail and construction sectors will support the ISM non-manufacturing index in the coming months."
"This should offset at least some of any greater drag from the sequestration government spending cuts, which appear to have hit activity in the health and social assistance sector," he added.
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