U.S. non-manufacturing sector’s growth decelerates more than anticipated in June - ISM

The Institute for Supply Management (ISM) reported on Tuesday that its non-manufacturing index (NMI) came in at 60.1 in June, which was 3.9 percentage points lower than unrevised May’s all-time high reading of 64.0 percent. The latest reading pointed to the growth in the services sector for the 13th straight month but at the slowest pace in four months.

Economists forecast the index to decrease to 63.5 last month. A reading above 50 signals expansion, while a reading below 50 indicates contraction.

Of the 18 services industries, 16 reported gains last month, the ISM said, even though challenges with materials shortages, inflation, logistics and employment resources continued to be an impediment to business conditions.

According to the report, the ISM’s non-manufacturing Production measure fell 5.8 percentage points to 60.4 percent from the May reading, while its New Orders gauge declined 1.8 percentage points to 62.1 percent and the Employment indicator plunged 6.0 percentage points to 49.3 percent. Elsewhere, the Supplier Deliveries index dropped 1.9 percentage points to 68.5 percent and the Inventories indicator decreased 1.6 percentage points to 49.9 percent. On the price front, the Prices index went down 1.1 percentage point to 79.5 percent, indicating that prices increased in June, and at a slightly slower rate.

Commenting on the data, the Chair of the ISM Services Business Survey Committee, Anthony Nieves, noted, “The past relationship between the Services PMI and the overall economy indicates that the Services PM for June (60.1 percent) corresponds to a 3.8-percent increase in real gross domestic product (GDP) on an annualized basis.”