US services sector cools in May

[WASHINGTON] The massive US services sector slowed to the weakest growth in a year in May, the Institute for Supply Management said Friday, fresh evidence of a tepid economy.

The ISM purchasing managers index for non-manufacturing activity fell to 52.9 from 55.7 in April. It followed two months' of increases that had been seen as signaling the economy was recovering from its first-quarter slump.

A reading above 50 indicates expansion in the services sector, which accounts for about 80 per cent of US economic activity.

"Overall, the report reflects a cooling-off and slowing in momentum from the previous months of growth for the non-manufacturing sector," ISM said.

Of the 18 industries surveyed, 14 reported growth, led by health care and accommodation and food services. Mining, depressed by low energy prices, led the four industries in contraction.

There were sharp falls in business activity and new orders in May. Prices paid for materials and services increased for the second month running, while the backlog of orders, an indicator of future growth, was flat after registering a slight increase in April.

Employment contracted in May after two straight months of growth, to 49.7 from 53.0 in April.

"Company continues to ramp-down full-time employees," one survey respondent said. "Some people left and were not back-filled. Attrition," another commented.

The ISM services data came on the heels of a shockingly weak US hiring report for May. The Labour Department said Friday the economy added only 38,000 jobs last month, the lowest number since September 2010 and sharply below analyst expectations.

That virtually wiped out expectations that the Federal Reserve would raise interest rates later this month.

AFP