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Why Did the US Economy Have a Weaker Services PMI in May?

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US Services PMI fell in May

The US Services PMI (purchasing managers’ index) stood at 51.2 in May—compared to 52.8 in April. It didn’t meet the Market expectation of 53.1, according to data provided by Markit Economics. The US Services PMI showed the lowest figure in the last three months. New business orders slowed in May. The US Composite PMI stood at 50.8 in May—compared to 52.4 in April. The manufacturing and services PMI showed a weaker uptrend in May.

The US Services PMI represents the performance of various companies such as IT and computing, financial services, business and personal services, and hotels and restaurants. This index tracks the performance of employment, inventories, sales, and business growth of these companies.

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In 4Q15, we saw that the service sector contributed the most to the GDP performance. Entertainment and recreation provided strong growth for the economy (IWF) (IWM) (VOO) in 4Q15. However, the recent fall in the US Services PMI indicates that the economy could face a slowdown in the service sector. If the business sentiment improves in the economy (SPY) (VFINX), then we might see a rise in the US Services PMI.

In the next part, we’ll analyze the performance of Japan’s manufacturing PMI in May.

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