US services sector growth steps up in June

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WASHINGTON: The US economy’s huge services sector saw growth accelerate in June after a slowdown in May, as new orders climbed even as employment slipped, the Institute for Supply Management said Thursday.
The monthly survey showed 16 of 18 industries posted growth, with one unchanged and one declining.

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The Non-Manufacturing Index rose 0.5 points to 57.4 percent, retracting most of the slowdown seen in May. That was well above the consensus among analysts for a decline to 55.0 percent.

The report is “continuing to reflect strength especially after last month,” said Anthony Nieves, chair of the ISM’s non-manufacturing survey committee.

Among the components that make up the overall index, new orders rose nearly three points to 60.5 percent, while employment slipped two points to 55.8 percent from a very strong reading in the prior month, the report said.

The report is “continuing to reflect strength especially after last month,” said Anthony Nieves, chair of the ISM’s non-manufacturing survey committee.

“I didn’t know how sustainable it would be but it seems to be taking this momentum forward. Especially new orders indicates still going to see continued growth going forward,” Nieves told reporters in a conference call.
But he said employment bears watching since that historically has tended to dip in the summer months.

The overall index captures activity among all segments of the services sector, the largest component of the US economy. A reading of more than 50 percent indicates expansion, and despite the modest slowdown the sector has been growing for 90 months.

Jim O’Sullivan of High Frequency Economics noted that the index was stronger than expected and “is up significantly from 54.9, on average, in 2016.”

The average for the past 12 months is 56 percent.

And while there is not a direct correlation to GDP growth “there is certainly no sign in these data of the economy weakening,” O’Sullivan said in a research note.

Another notable component of the index was prices, which rose to 52.1 percent from 49.2, with 14 industries reporting increased prices and only two reporting declines.

Nieves previously has noted that companies lack pricing power, which has kept the index in check in recent months.

 

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