Another top-tier (or close-to-top-tier) US macro datapoint, another beat.
The marquee gauge of activity in the largest part of the world’s biggest economy topped expectations on Wednesday, when the ISM services headline printed 54.5. Economists collectively expected 53.8.
The readout for May counts as the best since February and the second-best since October of 2024.
The release comes two days on from another solid read on ISM’s manufacturing survey. As the figure shows, both have printed above 50 in tandem every month this year.
Just one in 17 services industries reported a contraction for May. The services-side equivalent of the factory production index registered 57.7, while the new orders gauge rose nearly four points to 57.3.
It wasn’t all good news, though. The prices gauge moved up to a scorching 71.3, and the employment index remained below 50 for a third straight month.
“For the third month in a row, no commodities in the report listed as down in price, with multi-month runs of being up in price for aluminum, copper, diesel, gasoline, software licensing and transportation,” ISM’s Steve Miller remarked, adding that respondents “frequently” described “hiring freezes” rather than firings.
“Most industries,” he went on, “reported they were holding flat in employment month over month.” So, it’s the same “no hiring, no firing” narrative we’ve heard time and again over the last year.
Two anecdotes, one from a panelist in accommodation and food services, the other from a respondent in utilities, capture the gist of myriad undercurrents. “We are seeing the dual effects of the administration’s tariff policy dynamics and the conflict in the Persian Gulf affect our pricing,” the former said. “Inflationary pressures continue to impact pricing in certain categories,” said the latter, on the way to flagging “general concern over supply continuity due to unprecedented demand in the utility space.”
All in all, this was an as-expected update. As was the case with ISM manufacturing, the picture is one of an economy that wants to expand, and is expanding, despite gale-force headwinds and uncertainty “the likes of which nobody’s ever seen before,” as Donald Trump might boast, unironically.
What do you make of David Rosenberg’s article today entitled Why The Bond Market Correction Has Seen Its Peak, were says the real US economy beyond Ai is very weak?
I think he’s probably right, but I also think that’s stating the obvious. And I mean, we all know what we’re going to get from David. His analysis is always trenchant, but he’s been writing more or less the same thing for decades. He’s a respectable version of so many permabears. (That’s a compliment.)