U.S. Services Index Jumps to a Four-Month High on Reopenings
A gauge of U.S. service industries jumped to a four-month high in June and showed the resumption of growth as the economy reopened more broadly from pandemic-induced lockdowns.
The Institute for Supply Management said Monday that its non-manufacturing index soared a record 11.7 points to 57.1 last month. Readings above 50 indicate growth, and the June figure exceeded the 50.2 median forecast in a Bloomberg survey of economists.
The rebound at service providers follows a similar jump in the group’s manufacturing gauge and indicates that the economy is recovering from its pandemic-related recession. At the same time, recent spikes in Covid-19 cases threaten to restrain the pace of improvement in services, which make up nearly 90% of the economy.
“Respondents remain concerned about the coronavirus and the more recent civil unrest; however, they are cautiously optimistic about business conditions and the economy as businesses are beginning to reopen,” Anthony Nieves, chairman of the ISM’s non-manufacturing business survey committee, said in a statement.
The ISM surveys measure changes in activity rather than levels and can be prone to large swings during turning points in the economy. Businesses are currently facing a variety of hurdles, including elevated unemployment, tepid business investment and weak global demand.
Agriculture, accommodation and food services, wholesale trade and real estate led the 14 industries reporting growth in June, while three industries contracted.
The purchasing managers’ measure of service-related business activity, which parallels the ISM’s factory production index, jumped a record 25 points to 66 in June, the second-highest in records dating back to 1997.
A gauge of new orders climbed nearly 20 points to a four-month high of 61.6.
The ISM’s measure of services employment, however, remains weak and continues to signal job cuts. The gauge advanced to 43.1 in June from 31.8, but is well below a year-ago level of 55.2 as the pandemic continues to upend the labor market across industries.
The latest figures from the government showed a jobless rate at 11.1% in June compared with 3.5% just before the pandemic. Some 19.3 million Americans also remain on state unemployment benefit rolls.
The ISM’s index of exports also surged in June, reaching 58.9, the highest since the end of 2018, as economies reopened in other nations.
— With assistance by Kristy Scheuble
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