US economic surveys are highlighting increasing concerns over trade uncertainty, as recent data suggests a slowdown in growth. The ISM services index has unexpectedly dipped below the critical 50 mark, indicating contraction for the first time since June last year. The index fell to 49.9 in May, a decline from April’s 51.6 and below expectations of 52.0.
Both the services and manufacturing indices now point to a concerning softening of economic activity, prompting worries about potential GDP growth stagnation in the latter half of 2025. Notably, new orders plummeted from 52.3 to 46.4, with overall business activity stalling at 50.0 compared to April’s 53.7. Backlogs also signaled weakness at 43.4, suggesting limited prospects for an increase in output amidst ongoing trade uncertainties.
While employment saw a slight rise to 50.7 from 49.0, this still indicates only modest payroll gains anticipated for Friday’s report. In connection, the ADP data revealed that US private sector payrolls increased by a mere 37,000 in May, falling short of the 114,000 consensus and marking the weakest growth since March 2023. April’s figures were also revised down to 60,000 from an initial 62,000.
Historically, the ADP’s numbers differ from the Bureau of Labor Statistics’ non-farm payroll figures, which remain crucial for understanding labor market trends. The BLS reported a private non-farm payroll increase of 167,000 in April, contrasting sharply with ADP’s lower estimates. The upcoming BLS jobs report is expected to show growth of around 130,000, slightly below the six-month average of approximately 160,000, which has been a strong predictor of actual job gains.
Despite rising prices within the ISM services report, indicating inflationary pressures, the Federal Reserve is likely to maintain its current policy stance. Thus, while some regional Fed surveys signal potential upward revisions for the ISM data, today’s findings present a complex economic landscape filled with uncertainty.