WASHINGTON (Reuters) – Growth in the U.S. service industry slowed for a second straight month in May, but businesses saw strong increases in new domestic and export orders, a survey showed on Friday. .
The Institute for Supply Management said its non-manufacturing activity index fell to 55.9 last month from 57.1 in April. Economists polled by Reuters had expected the non-manufacturing index to fall to 56.4.
A value above 50 indicates an expansion of the service sector, which accounts for more than two-thirds of US economic activity. The continued slowdown could reflect ongoing supply constraints, which have been compounded by China’s zero-COVID policy and Russia’s ongoing war on Ukraine.
The ISM measure of new orders received by service businesses rebounded to 57.6 last month from 54.6 in April. Expenditure falls on services rather than goods. Companies also reported an increase in export orders.
Its services sector employment indicator also rebounded to 50.2 from 49.5 in April. The rise in employment has helped businesses make progress in clearing the backlog of unfinished work.
The ISM survey’s supplier shipments measure fell to 61.3 from 65.1 in April. A reading above 50% indicates slower deliveries. Services inflation remained high. A measure of prices paid by service industries for inputs slipped to a still-high reading of 82.1 from 84.6 in April.
The Federal Reserve has raised its key rate by 75 basis points since March. It is expected to raise the policy rate by half a percentage point at each of its next meetings this month and in July. Fed Vice Chair Lael Brainard said on Thursday she saw little reason to pause in September.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)