TechFlow news, June 4 — According to Jinshi Data, U.S. services sector activity contracted for the first time in nearly a year in May, while input prices for businesses rose, suggesting the U.S. economy could still face a period of very slow growth alongside high inflation.
The Institute for Supply Management (ISM) said on Wednesday that its non-manufacturing PMI fell to 49.9, dropping below the 50 threshold and reaching the lowest level since June 2024. The new orders index declined from 52.3 in April to 46.4, likely due to fading momentum from tariff-related frontloading.
Service sector customers view inventories as excessively high relative to demand, which is not a positive sign for near-term economic activity. Supplier delivery performance continued to deteriorate, with factory delivery times lengthening, indicating supply chain strain that could fuel inflation through shortages. Businesses are also seeking to pass tariffs on to consumers. The services input prices paid index surged from 65.1 in April to 68.7, the highest level since November 2022, further reinforcing this trend.
Most economists expect the impact of tariffs on inflation and employment to become evident in so-called hard economic data during the summer months.
