The Institute for Supply Management (ISM) reported on Wednesday its non-manufacturing index (NMI) came in at 56.9 in May, which was 1.4 percentage points higher than the April reading of 55.5 percent. The May reading pointed to the fastest expansion in the services sector since February.

Economists forecast the index to remain at 55.5 last month. A reading above 50 signals expansion, while a reading below 50 indicates contraction.

16 non-manufacturing industries reported growth last month, the ISM said.

According to the report, the ISM’s non-manufacturing business activity measure rose to 61.2 percent, 1.7 percentage points higher than the April reading of 59.5 percent. That reflected growth for the 118th consecutive month, at a faster rate in May. The new orders gauge increased to 58.6 percent, 0.5 percentage point higher than the reading of 58.1 percent in April. The employment indicator surged 4.4 percentage points in May to 58.1 percent from the April reading of 53.7 percent. Meanwhile, the Prices Index dropped 0.3 percentage point from the April reading of 55.7 percent to 55.4 percent, indicating that prices increased in May for the 24th consecutive month.

Commenting on the data, the Chair of the ISM Non-Manufacturing Business Survey Committee, Anthony Nieves, noted, "The past relationship between the NMI and the overall economy indicates that the NMI for May (56.9 percent) corresponds to a 2.9-percent increase in real gross domestic product (GDP) on an annualized basis.”