U.S. service sector activity saw record growth in the month of May, according to a report released by the Institute for Supply Management on Thursday.
The ISM said its services PMI rose to 64.0 in May from 62.7 in April, with a reading above 50 indicating growth in the sector. Economists had expected the index to inch up to 63.0.
With the bigger than expected increase, the services PMI reached another all-time high, surpassing the previous record high of 63.7 in March.
“The rate of expansion is very strong, as businesses have reopened and production capacity has increased,” said Anthony Nieves, Chair of the ISM Services Business Survey Committee.
He added, “However, some capacity constraints, material shortages, weather-related delays, and challenges in logistics and employment resources continue.”
The bigger than expected increase by the headline index partly reflected an acceleration in the pace of growth in business activity, with the business activity index jumping to 66.2 in May from 62.7 in April.
The new orders index also crept up to 63.9 in May from 63.2 in April, indicating slightly faster growth in new orders.
On the other hand, the employment index pointed to a slower pace of job growth in the sector, falling to 55.3 in May from 58.8 in April.
The report also showed the supplier deliveries index surged up to 70.4 in May from 66.1 in April, with a reading above 50 indicating slower deliveries.
The prices index also jumped to 80.6 in May from 76.8 in April, reaching its highest level since hitting an all-time high of 83.5 in September of 2005.
The ISM released a separate report on Tuesday showing manufacturing activity in the U.S. expanded at a slightly faster pace in the month of May.
The manufacturing PMI inched up to 61.2 in May from 60.7 in April. The uptick surprised economists, who had expected the index to come in unchanged.
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