A noticeable pick-up in the services sector offset continued softness in manufacturing to lift the PMI composite by 1.2 points to a respectable 53.9 in the May flash. The services PMI rose 1.5 points to 54.0 as new orders are at their best level of the year and employment is improving. Costs in the service sample are rising due to higher wages and higher costs for raw materials. And service providers, in further evidence that demand is strong, are passing these costs through with output prices also at their highest level of the year.
Manufacturing, at 52.5, is a different story with new orders, output and employment all subdued and slowing. Export sales posted only a marginal increase in the month with domestic sales also remaining subdued. Facing slower demand, manufacturers in the sample are reducing their inventories. In contrast to the service side, input costs in manufacturing are slowing.
Of special note in the report is a subdued year-ahead outlook in the service sector, one that contrasts with strong optimism at the beginning of the year. This report is mixed with manufacturing continuing to run behind other advance reports though services are mostly positive.
The PMI composite held steady in April at a moderate 53.2 which is above either of the two components: 52.8 for manufacturing and 53.1 for services. This anomaly aside, the story of these reports is that, in comparison to nearly all other advance surveys, they are running at noticeably more moderate rates of growth and more correctly in line with government data. For the May flash the consensus is: 53.2 for the composite, 53.0 for manufacturing and 53.1 for services.