| Consensus | Consensus Range | Actual | Previous | |
| Composite Index | 44.9 | 47.6 | ||
| Services Index | 42.9 | 42.9 to 42.9 | 44.3 | 46.5 |
Highlights
The services PMI fell to 44.3 in May from 46.5 in April, marking the sharpest decline in five-and-a-half years as businesses struggle with price pressures and flagging employment. The final result is better than the preliminary estimate for a contraction to 43.5.
Weighing on the overall result as well was a cautious approach by businesses as they are delaying committing to new projects. The upshot is a steep decline in sales volumes and new orders, with export orders in May falling at one of the fastest rates since the series began in 2014.
The conflict in the Middle East continues to have a negative impact through higher fuel prices, while prices paid for raw input goods and computer hardware were also cited by respondents.
The composite index which also includes the manufacturing sector contracted to 44.9 in May from 47.6 in April, but was well above the preliminary result of 42.9. Similar issues were cited for the decline, including prices and input costs.
Today's results show the private sector to be suffering from the conflict in the Middle East. This has erased the optimism seen as early as February when companies were looking to expand production and hiring. That scenario will certainly continue into June and likely the coming months as well.
Market Consensus Before Announcement
The consensus sees no revision from the flash at 42.9, a dismal recessionary reading, down from an already bad 46.5 in April.
Definition
The Composite Purchasing Managers' Index (PMI) provides an estimate of private sector output for the preceding month by combining information obtained from surveys of around 750 manufacturing and service sector companies. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) output versus the previous month and the closer to 100 (zero) the faster is output growing (contracting). The report also contains the final estimate of the services PMI. The data are provided by S&P Global.
Description
Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the purchasing managers' manufacturing indexes, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.