New Orders Drive Up Service Sector Activity in May
4 hr 40 min ago
Activity in the services sector jumped in May, with a pair of industry surveys showing business growing as orders increased, despite continued price pressures and signs of slower hiring.
The service sector Purchasing Managers’ Index (PMI) from the Institute of Supply Management (ISM) showed a jump in May to 53.8%. It was a rebound from a decline in April which was the first time in more than a year. The increase surprised economists surveyed by the Wall Street Journal and Dow Jones Newswire, whose forecast undershot by more than three percentage points.
“This was a stronger-than-expected ISM Services report that goes against the grain of the steady stream of weaker-than-expected data we have seen from the U.S. economy of late,” wrote Scott Anderson, chief U.S. economist at BMO. “This report suggests the service sector expansion still has quite a bit of resilience and vibrancy left even as the manufacturing sector continues to struggle under the weight of a stronger dollar, sluggish global demand, and higher interest rates.”
As expected, the S&P Global Market Intelligence flash U.S. services PMI in May came in at 54.8, reaching its highest level in the past 12 months.
Both surveys showed new orders rebounded after dipping in April. However, the S&P Global service PMI showed that firms lowered their hiring levels for the second straight month, while the ISM services employment index contracted for the fifth of the past six months, despite improving in May.
“Although the service sector has not matched the same weakness as the manufacturing sector, the labor market remains muted,” wrote Brian Wesbury, chief economist at First Trust Advisors.
-Terry Lane
This blog post has been updated to include commentary from economists.
Government-Backed Mortgages Lead Demand During Holiday-Shortened Week
7 hr 28 min ago
In results adjusted for the Memorial Day holiday, mortgage applications dropped 5.2% last week, as increasing interest in government-backed housing loans wasn’t able to offset declines in demand for standard mortgage loans, according to Mortgage Brokers Association data.
The declining demand comes as mortgage rates ticked upward for a second week, with the 30-year fixed-rate mortgage coming in at 7.07%, reaching its highest levels in a month. Purchase activity declined 4% during the holiday week, while refinancing was down 7%. However, the share of both Veterans Administration (VA) and Federal Housing Administration (FHA) loans increased
“Government purchase volume was down less, helped by growth in VA applications. The market is relying on first-time homebuyer demand, and many first-time buyers do use government lending programs,” said Mike Fratantoni, senior vice president and chief economist at MBA.
-Terry Lane
