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First Cut: Richmond Fed service sector revenues improve in May although still in recession

The Richmond Fed’s current revenues index in the Survey of Service Sector Activity rose to -48 in May from -87 in April. Expected revenues rose to -12 after -50 in the prior month. While conditions can be said to have improved markedly in May, these are still very weak in the historical context.

The detail indexes echo the overall softness for services in the District in May. The index for demand was up to -40 after -72 in April. Employment was off the low of -34 in April to -26 in May but without suggesting that payrolls were going to start rising any time soon. Wages continued to contract at -5 in May after -15 in April, if more slowly. Finding workers with the right skillset was easier with the available skills index at 19 in May after 11 in April and the highest for this series.

The prices paid index declined to 2.40 in May after 3.87 in April as energy costs were trending lower until very recently. The prices received index was down to 1.01 in May after 1.45 in April and the lowest since 0.95 in May 2014.
The Richmond Fed revenues index correlates well (0.819) with the ISM Non-Manufacturing Index. In the context of the other District Bank surveys for the service sector, on net, the ISM index is likely to rise from the 41.8 in April.

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