ISM Non-Manufacturing: Capacity Getting Tight

Wells Fargo Research Team Wells Fargo

The ISM non-manufacturing index rebounded nearly two points in May to 58.6. Current activity and new orders picked up, putting further strains on rapidly tightening capacity. Price pressures continue to mount.

Backlogs Rising, Delivery Times Lengthening

Broad economic activity picked up in May according to the ISM non-manufacturing survey. The composite index nearly rebounded back to its March level, coming in at 58.6.
Capacity looks increasingly constrained. Backlogs are rising at the fastest pace in the non-manufacturing survey’s 20+ year history, while supplier delivery times are increasing at the strongest clip of this expansion.

Price Concerns Intensifying

The prices paid component jumped to 64.3. We expect price pressures to remain a concern given the lengthening in supplier delivery times and growing backlogs.
Consistent with the May increase in nonfarm payrolls, the employment index indicated hiring picked up in May. The series rose to 54.1, but remains below its six-month average and indicates that the overall index has slowed since early this year.

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Wells Fargo Research Team

Wells Fargo

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