By Colin Kellaher

Services activity in the middle of the U.S. remained strong in May, while expectations for future activity eased a bit while remaining positive, according to a monthly survey by the Federal Reserve Bank of Kansas City.

The Tenth District Services Survey's composite index, a weighted average of indexes covering revenue/sales, employment and inventory, came in at 20 for May, matching April's reading but down from 30 in March. Readings above zero indicate expansion, while those below zero indicate contraction.

The Kansas City Fed said the May reading was driven by more activity in transportation, retail trade, tourism and hotels, and restaurants, while growth eased for real estate, auto activity, and furniture and home-furnishing stores.

The bank said expectations for future services slipped in May but remained in positive territory with a reading of 26, down from 42 in April.

Higher inflation and supply shortages continued to weigh on firms surveyed. The bank said nearly 75% of firms reported worse supply disruptions and shortages compared with 2021, with most expecting those conditions to last at least another six months.

Some 88% of firms surveyed said they were affected by rising materials prices and a lack of availability/delivery times, while around 64% said they expect wages and prices to rise slightly or significantly faster compared with a year ago.

The Kansas City Fed's survey includes participants from such service industries as retail and wholesale trade, automobile dealers, real estate and restaurants. The survey provides information on current services activity in the Tenth District, which includes Colorado, Oklahoma, Wyoming, Nebraska, Kansas, the northern half of New Mexico and the western third of Missouri.

The bank's monthly manufacturing survey, released Thursday, showed that factory activity in central U.S. cooled in May compared with the previous month, but continued to expand at a solid clip.

Write to Colin Kellaher at colin.kellaher@wsj.com

(END) Dow Jones Newswires

May 27, 2022 11:38 ET (15:38 GMT)

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