U.S. Services Sector Activity Accelerated in May, Prices Paid Index Highest Since August 2022
By TopHolding Editorial · Wednesday, June 3, 2026 at 12:00 AM
Activity in the U.S. services sector unexpectedly picked up pace in May, with the ISM Services Index rising to 54.5 and marking the 23rd consecutive month of expansion. This acceleration was driven by increases in business activity and new orders, despite service companies facing their fastest price growth since 2022.
The U.S. services sector experienced an unexpected acceleration in May, with the ISM Services Index climbing to 54.5, surpassing consensus expectations of 53.8. This reading marks the 23rd consecutive month of expansion for the sector, which accounts for approximately two-thirds of the nation's economic output. The uptick was largely attributed to notable increases in business activity and new orders, even as service companies reported the fastest price growth since 2022.
Breaking down the key components, the business activity index rose to 57.7 from 55.9 in April, while the new orders index increased to 57.3 from 53.5. The new orders index rebounded after a significant decline from a three-year high of 60.6 in March. Both the business activity and new orders indices have consistently shown expansion over the past twelve months, indicating sustained demand within the services sector. Growth was broad-based in May, with seventeen out of eighteen major service industries reporting expansion; only the real estate sector noted contraction.
Despite the solid pace of growth, underlying concerns persist regarding the global economic landscape and inflationary pressures. The prices paid index, a key measure of inflation, increased to 71.3 in May from 70.7 in April, reaching its highest level since August 2022. While elevated, this figure remains below the apex observed during the COVID-related supply-chain disruptions, when the index touched the low 80s. Survey comments highlight that supply chain issues and rising fuel costs are contributing to inflationary pressures across certain product categories, prompting some service companies to postpone internal projects until greater stability returns.
Conversely, the employment index experienced a slight decline to 47.9 from 48.0, shifting into contraction after starting the year in expansion. This suggests a slowdown in hiring efforts, with companies that initially increased staffing now bringing it to a standstill. The supplier deliveries index also fell to 55.2 from 56.8. In related economic news, sales of cars and light trucks in May reached an annual rate of 16.1 million units, representing a 1.0% increase from April and a 2.7% rise from the previous year.
Key terms:
1. **ISM Services Index:** A monthly economic indicator based on a survey of purchasing and supply executives in over a dozen services industries, reflecting the health and direction of the non-manufacturing sector.
2. **Prices Paid Index:** A sub-index of the ISM Services Index that measures the prices businesses pay for materials and services, serving as an indicator of inflationary pressures.
3. **Expansion/Contraction:** In economic terms, sustained growth in economic activity is considered "expansion," while a period of decline is referred to as "contraction." For the ISM indices, a reading above 50 signals expansion, and a reading below 50 signals contraction.