U.S. Service Sector Growth Lowest Since April 2014

The U.S. nonmanufacturing sector lost some momentum in May, according to data released Wednesday by the Institute for Supply Management. But the report noted employment was still growing, a positive sign ahead of Friday's May payrolls report.

The ISM's nonmanufacturing purchasing managers index came in at 55.7 in May from 57.8 in April. Forecasters surveyed by The Wall Street Journal had expected last month's PMI to be little changed at 57.1.

Earlier Wednesday, data provider Markit said its service-sector composite slowed to 56.2 in May from 57.4 in April. Markit said its employment index showed an acceleration in hiring to the strongest pace since July 2014. As with the ISM, Markit readings above 50 indicate activity is expanding.

In the ISM report, the indexes of various business activities were still quite positive, if not as robust as in April.

Production slowed but not by much after a large gain in April. The business activity/production index fell to 59.5 from 61.6.

The ISM's new orders index slowed to 57.9 last month from 59.2 in April. The exports index jumped to 55.0 after it plunged to 48.5 in April from 59.0 in March.

Like the Markit survey, the ISM report was upbeat about payrolls ahead of Friday's employment report. The ISM employment index fell only a bit to 55.3 from 56.7 in April.

Earlier Wednesday, payroll processor ADP said it estimated U.S. service providers had created 192,000 new jobs in May. That was ADP's highest service-jobs estimate since December 2014.

According to ISM, companies are seeing input prices rising again, after cheap energy held down costs. The ISM prices index increased to 55.9 from 50.1.

The ISM nonmanufacturing report is comprised mainly of comments from service-sector companies that make up the bulk of the U.S. economy, but it also includes construction and public administration.