May US ISM services 49.9 vs 52.0 expected

• Prior was 51.6

• Prices paid: 68.7 vs. 65.1 prior

• New orders: 46.4 vs. 52.3 prior — first negative reading in a year

• Employment: 50.7 vs. 49.0 prior

• Business activity: 50.0 vs. 53.7 prior

• Supplier deliveries: 52.5 vs. 51.3 prior

• Inventories: 49.7 vs. 53.4 prior

• Backlog of orders: 43.4 vs. 48.0 prior

• New export orders: 48.5 vs. 48.6 prior

• Imports: 48.2 vs. 44.3 prior

• Inventory sentiment: 62.9 vs. 56.1 prior

There was a time when a report like this would truly rattle markets but it’s turned into a ‘boy who cried wolf’ scenario with consumers continuing to spend (and the government continuing to spend too). Notably, there is some USD selling on this and Treasury yields have ticked lower by 2-4 bps. USD/JPY is now down 80 pips on the day and fell about 50 pips on this.

Comments in the report:

• “Tariff variability has thrown residential construction supply
  chains into chaos. Many items are still manufactured in southeast Asia,
  and suppliers are beginning to test the waters for increases. Major
  heating, ventilation and air conditioning equipment manufacturers are
  passing on their cost increases due to higher refrigerant and steel
  commodity prices. Planning is difficult for community projects that
  could be scheduled for the next 22 to 30 months.” [Construction]
• “Steady, with some signs of growth and opportunity.” [Finance & Insurance]
• “Federal budget cuts are affecting purchasing decisions.” [Health Care & Social Assistance]
• “Tariffs remain a challenge, as it is not clear what duties apply.
  The best plan is still to delay decisions to purchase where possible.”
  [Information]
• “Due to the tariffs, we’ve had had small price increases on our
  international raw materials, and some suppliers are holding back
  inventory to cover uncertainties. We’ve seen some slowdown in the
  production of new wells, but there has been an increase in restimulation
  of existing wells.” [Mining]
• “Life science startups continue to push forward on clinical trials
  and market launches. The level of investment grew this month. The
  impacts of tariffs are being watched but are not driving changes in
  strategic plans.” [Professional, Scientific & Technical Services]
• “The projects are slowly starting to be issued, albeit with a great deal of market uncertainty.” [Public Administration]
• “Business is strong. Consumer concerns over tariffs may be driving some demand.” [Retail Trade]
• “Tariffs have increased the cost of doing business. It’s too early
  to tell what the lasting impact of this will be. We have tried to budget
  for the increase, but it has been a moving target. Overall, we are
  seeing a leveling off in business activity; time will tell if this is
  temporary or long lasting.” [Transportation & Warehousing]
• “Business activity is increasing due to demand for data centers,
  commercial growth and infrastructure. Residential growth remains flat.”
  [Utilities]

This article was written by Adam Button at www.forexlive.com.