U.S. Service Industries' Expansion Helps Economic Rebound

Updated on

A faster-than-forecast June pace of expansion at America’s service industries, which make up the bulk of the economy, signals solid second-quarter growth, a survey from the Institute for Supply Management showed Thursday.

Highlights of ISM Non-Manufacturing (June)

  • Non-manufacturing index rose to 57.4 (est. 56.5) from 56.9 in May; readings above 50 indicate growth
  • Measure of orders jumped to 60.5 from six-month low of 57.7
  • Employment gauge settled back to 55.8 from an almost two-year high of 57.8 

Key Takeaways

A steady job market, healthier consumer finances and low borrowing costs are driving better demand for services, which account for about 90 percent of the economy and span industries such as utilities, retailing, health care and construction.

The latest month’s reading, which exceeds the gauge’s average for this year and last, is consistent with a pickup in second-quarter economic growth. The services data also are in sync with resilient activity at U.S. factories. The ISM manufacturing index, released earlier this week, surged to the highest level in nearly three years.

Sixteen non-manufacturing industries reported growth, including wholesale trade, management of companies, transportation and professional, scientific & technical services.

Official’s View

The services data are “continuing to reflect strength” in the economy, Anthony Nieves, chairman of the ISM non-manufacturing survey, said on a conference call with reporters. “We’re still going to see continued growth moving forward.”

Other Details

  • Index of business activity increased to 60.8 from 60.7
  • Gauge of export orders advanced to 55 from 54.5
  • Measure of order backlogs dropped to 52.5 from a May reading of 57 that was the highest since August 2007
  • The prices-paid index rose to 52.1 after falling in the prior month to 49.2
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