The U.S. services sector expanded at a faster pace in May, with the ISM Services PMI rising to 54.5% from 53.6% in April. The reading significantly outperformed the consensus forecast of 53.7%, marking the 23rd consecutive month of growth. Expansion was primarily driven by robust gains in New Orders, which jumped to 57.3%, and Business Activity, which reached 57.7%.
Despite the headline growth, the report highlighted ongoing challenges. The Prices Index climbed to 71.3%, its highest level since late 2022, signaling persistent inflationary pressure in the services industry. Meanwhile, the Employment Index remained in contraction for a third month at 47.9%. Market analysts noted that the resilient activity combined with sticky price pressures may reinforce the Federal Reserve's cautious approach toward potential interest rate cuts.