The pace of growth in the U.S. services sector slowed slightly in June, but this key category still turned in a strong performance. All told, the survey came in at 56.0, which was right on target with expectations. However, it was a tad below the 56.3 reading reached in May. (It should be noted that a score of 50.0, or better, implies that this area is expanding; a result below 50.0 suggests some contraction in this arena.)
This report is prepared by the Institute for Supply Management, an Arizona-based trade group that earlier this week had reported a similarly strong reading on manufacturing activity. All told, this was the 53rd straight month in which non-manufacturing activity has increased.
Meanwhile, within this broad category, we saw some sectors expanding more rapidly, while other categories slowed their advance. However, no individual component indicated any contraction. Of note, we saw business activity growth slow notably from 62.1 in May to 57.5 last month. However, increases in growth rates were recorded by new orders, which rose above 61, employment, supplier deliveries, and export orders. Prices eased their rate of increase just slightly, but held above 61.
All told, the score of 56.0 was the second best reading of the year, bettered only by May's 56.3. The low point in 2014 occurred in February, when the services sector registered a result of 51.6, as the long and severe winter continued to take a harsh toll on the economy. For the past year, the average score for a month has been 54.7, within a 12-month range of 57.9 (reached last August) and the aforementioned 51.6.
Further breaking the report down, we find that 14 of the 18 reporting industries showed aggregate growth last month, led by construction, real estate, utilities, and the arts. Among the four industries reporting a contraction in June, educational services was the weakest.
As to what respondents were saying, we note that construction managers reported strong activity. Other positive responses came from professional, scientific, and technical services, and wholesale trade.
Importantly, this was the third strong economic report we saw today, led by a better-than-expected increase in job growth and a shrinking U.S. trade deficit. Such data, along with the companion report on manufacturing issued on Tuesday, signal that the U.S. economy ended the first half in better shape and should start the current half in good order, as well.
At the time of this article's writing, the author did not have positions in any of the companies mentioned.