U.S. Service Industries Grow at Fastest Pace in Four Months

(Bloomberg) -- U.S. service industries expanded in June at the best pace in four months as more providers reported stronger sales and orders, an Institute for Supply Management survey showed Thursday.

Highlights of ISM Non-Manufacturing (June)

  • Non-manufacturing index rose to 59.1 (est. 58.3) from 58.6; readings above 50 indicate growth
  • Measure of business activity, which parallels the ISM’s measure of factory production, climbed to 63.9, the highest since 2005, from 61.3
  • Gauge of new orders advanced to a four-month high of 63.2 from 60.5

Key Takeaways

The strengthening in services follows the group’s data earlier this week that showed manufacturing matched its second-fastest pace since 2004. The reports add to signs that the economy ended the second quarter with greater momentum even as businesses remain anxious about escalating trade tensions.

The non-manufacturing survey -- which includes industries such as retail, utilities, health care and construction -- shows services continue building on two years of improvement, with the main gauge hovering close to the strongest level in more than 12 years.

This year’s tax cuts have helped underpin growth, with data suggesting that the extra cash is showing up in increasing orders, more construction and solid demand from companies and consumers.

Still, risks are mounting from the Trump administration’s threats to expand tariffs on some of America’s biggest trading partners. Starting a trade war could lift inflation, curb business investment and weigh on economic growth.

Other Details

  • Employment index decreased to 53.6 from 54.1 in May
  • Index of supplier deliveries slipped to 55.5 from 58.5 in May, contrasting with a jump in a similar gauge for factories; still indicates longer delivery times
  • Gauge of prices paid decreased to 60.7, lowest since December, from 64.3
  • Measure of order backlogs fell to 56.5 from 60.5; export orders gauge advanced to 60.5 from 57.5

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