US service industry creeps toward growth as lockdowns ease, ISM report shows

• The US service industry, easily the biggest component of the nation's economy, slowed its decline and inched toward growth in May, according to the Institute for Supply Management's latest report.
• The organization's non-manufacturing index climbed to 45.4 in May from 41.8. Its new orders index rose 9 percentage points to 41.9, and an index for business activity gained 15 percentage points to 41.
• While readings below 50 still represent industry contraction, the May report suggests service sectors are stabilizing alongside economic reopenings.
• The Wednesday release follows ISM's manufacturing report published Monday, which showed factory activity similarly stabilizing through the month.

The biggest part of the US economy is slowly inching its way back to growth after plummeting amid coronavirus lockdowns.

The Institute for Supply Management announced Wednesday its non-manufacturing index climbed to 45.4 in May from 41.8. The organization's new orders index jumped 9 percentage points to 41.9, and its index for business activity gained 15 percentage points to 41.

Any reading below 50 represents contraction throughout the industry, while a reading above the threshold indicates growth. Despite its upward trend, May's report ushered in the second month of service-industry shrinkage following a 122-month growth period.

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Of the 28 services sectors tracked by ISM, 14 reported a decrease in May, including the educational services, wholesale trade, and utilities sectors. The four reporting growth through the month were agriculture and forestry, finance and insurance, public administration, and information.

"Respondents remain concerned about the ongoing impact of the coronavirus. Additionally, many of the respondents' respective companies are hoping and/or planning for a resumption of business," Anthony Nieves, ISM's Non-Manufacturing Business Survey Committee chair, said in the report.

Despite the broadly optimistic report, ISM's index for service industry employment increased only 1.8 percentage points to 31.8. The reading signals lasting pain in business hiring through relaxed lockdowns. Friday's jobs report will further detail May hiring trends and is expected to peg the unemployment rate at roughly 20%.

While the second quarter is expected to bear the brunt of the coronavirus' economic toll, ISM's latest reports suggest April may serve as the nation's trough before recovering. A separate report from the organization released Monday showed its manufacturing sector index gaining to 43.1 in May from 41.5, a similar turn higher from a sharp decline.

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