Service sector activity in the U.S. unexpectedly saw a slight contraction in the month of May, the Institute for Supply Management revealed in a report released on Wednesday.
The ISM said its services PMI fell to 49.9 in May from 51.6 in April, with a reading below 50 indicating contraction.
With the unexpected decrease, the services PMI dropped to its lowest level since hitting 49.2 in June 2024, which marked the last time the index was in contraction territory.
The surprise dip by the headline index partly reflected a notable downturn by new orders, as the new orders index tumbled to 46.4 in May from 52.3 in April. The index indicated contraction for the first time since June 2024.
The business activity index also slid to 50.0 in May from 53.7 in April, marking the index's first month out of expansion territory since May 2020.
Meanwhile, the ISM said the employment index rose to 50.7 in May from 49.0 in April, suggesting employment activity in the services sector returned to expansion after two consecutive months of contraction.
The report said the prices index also jumped to 68.7 in May from 65.1 in April, reaching its highest level since November 2022.