The S&P Global US Services PMI was revised slightly lower to 54.9 in May of 2023 from a preliminary 55.1 but continued to point to the strongest expansion in the services sector since April 2022, mainly supported by new business.
The upturn in new orders was driven by improved demand conditions in both domestic and export markets. At the same time, firms stepped up their hiring activity again, with employment increasing at a solid pace.
Sufficient capacity to process incoming new business allowed companies to reduce backlogs of work for the first time in four months. On the price front, rates of both input price and output charge inflation softened since April though remained elevated. Meanwhile, business confidence picked up to the highest level in a year, albeit still weaker than the series average
We also saw the release of the S&P Global US Composite PMI, which came in at 54.3 in May 2023, little-changed from a preliminary estimate of 54.5 and above April’s final reading of 53.4.
The latest PMI signalled the fastest expansion in business activity for just over a year, driven by the service sector. This helped offset a weaker rise in manufacturing production.
Total new business continued to increase, despite a sharp drop in overseas goods trade, employment rose at a solid pace and backlogs of work fell.
Factory Order data showed that New orders for manufactured goods in the US increased by 0.4% from the previous month in April of 2023 amid strong defense spending but slowing from the downwardly revised 0.6% increase in the prior month and missing market forecasts of a 0.8% jump.
Albeit slower, considerable order growth was noted for transportation equipment, carried by defense aircraft and parts, while demand for machinery rebounded.
On the other hand, order levels stalled for fabricated metal products and contracted for primary metals, computers and electronic products, and electrical equipment, appliances, and components underscoring the impact of higher interest rates. Excluding defense, orders fell by 0.4%. On an annual basis, US manufacturing orders expanded by 1.4%.