Service-Sector Expansion Rises Slightly in May

Politics Reuters

The pace of growth in the vast services sector picked up a tad in May as a gauge of new orders improved, according to an industry report released on Tuesday.

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The Institute for Supply Management said its services index edged up to 53.7 from 53.5 in April, a touch above economists' forecasts for it to hold steady at April's level.

A reading above 50 indicates expansion in the sector.

The forward-looking new orders component rose to 55.5 from 53.5, while the measure of prices paid eased further to 49.8 from 53.6.

But the employment component fell to its lowest level since November 2011 which, after last week's disappointing employment report, added to signs job growth is slowing. The index fell to 50.8 from 54.2.

"Overall, the data held up, but is still at a low level and I do not think this counters the significantly weak data we have been seeing," said Tom Porcelli, chief economist at RBC Capital Markets in New York.

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Still, the modest advance was a relief to the stock market after recent data that has raised concerns that economic growth was slowing.

Stocks edged higher immediately after the data, while Treasuries prices widened losses and the dollar gained against the yen.