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US Service Economy Surges ahead in June: ISM

H.S. Borji
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The US service economy eased slightly in June, but remained elevated as new orders supported another strong month of job creation.

The Institute for Supply Management’s gauge of national service activity eased from 56.3 to 56. A median estimate of market analysts called for no change to the headline PMI.

The US service economy has been above the 50 mark that separates expansion from contraction for 53 consecutive months.

Fourteen non-manufacturing industries expanded last month, led by construction, real estate and rental and leasing. The four industries to report contraction in June were educational services, mining, accommodation and food services and healthcare.

Overall business activity eased in June, although 15 services sub-sectors reported growth, ISM data showed.

New orders accelerated at a sharper rate, led by growing consumer interest and higher demand for services and materials. Fifteen services sub-sectors reported an increase in new orders last month.

New export orders advanced for the third consecutive month, as seven sub-sectors reported growth in international trade. Seventeen percent of purchasing managers said new export orders were higher in June.

“Construction industry is extremely strong [and] business conditions look positive going forward,” said one manager from the construction sector.

“Business outlook is good, steady, but not yet strong,” said another representative from professional, scientific and technical services.

“Sales in many categories are improving, partially due to pent-up demand from the late arrival of spring,” said a purchasing manager from retail trade.

Service sector employment increased for the fourth consecutive month and at a faster rate. Thirteen services sub-sectors reported higher staffing levels last month, led by management of companies and support services, utilities and construction.

Nearly one-third of respondents said employment levels were higher in June, compared to 26 percent the previous month.

US employers added 288,000 nonfarm payrolls last month, following an upwardly revised gain of 224,000 in May, the Labor Department reported today. Service providers added 236,000 jobs, led by professional and business services, retail trade and food services.

The unemployment rate dipped from 6.3 percent to 6.1 percent.

The stronger than forecast jobs report reaffirmed the strong outlook for the US labour market, which has added an average of 272,000 jobs over the past three months.

In a separate report Markit Group confirmed the services sector last month expanded at the sharpest rate since October 2009, driven by higher output and business growth. Markit’s final PMI estimate was revised slightly from 61.1 to 61.0.

Markit said business activity rose to its highest level since the survey began in October 2009.

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