From Yahoo Finance: 2025-06-04 08:25:00

The U.S. services sector contracted for the first time in nearly a year in May, with businesses facing higher input prices. Uncertainty from Trump’s trade policies has left businesses wary, hindering economic growth. The ISM reported a decline in the nonmanufacturing PMI to 49.9, the lowest since June 2014.

Economists expected the services PMI to rise to 52.0, but it dropped below 50, indicating contraction. Businesses struggle to forecast due to tariff uncertainty. The ISM pointed out that while PMI levels suggest uncertainty, they don’t signal severe contraction.

Tariffs have disrupted supply chains, affecting industries like construction and information. Trump’s increased steel and aluminum duties are causing challenges for businesses. While some sectors are benefiting from tariffs, others are struggling with increased costs of doing business.

The ISM survey showed weak new orders and high inventory levels, indicating slowing activity. Suppliers’ delivery performance worsened, leading to strained supply chains and possible inflation. Businesses are passing on tariffs to consumers, leading to higher prices.

Supplier deliveries index rose, indicating slower deliveries, but likely due to supply chain bottlenecks. Prices paid for services inputs surged to 68.7, the highest level since November 2022. Economists anticipate inflation and employment impacts from tariffs to show in economic data soon.

Employment in the services sector increased in May, but scrutiny on job openings is rising. Economists downplayed the ADP National Employment Report, citing its poor prediction history. The government is expected to report an increase of 130,000 jobs in May, with a steady unemployment rate of 4.2%.



Read more at Yahoo Finance: US services sector contracts in May; businesses face higher prices