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US Service SEctor Accelerates in June

Posted by Joseph Trevisani on Jul 6, 2017 1:57:13 PM

America's service industries expanded at a better than expected pace in June following a similar surge in manufacturing giving the economy a strong conslusion to the second quarter.

The non-manufacturing index from the Institute for Supply Management registered 57.4 last month up from 56.9 in May and well ahead of the consensus estimate of 56.5.

Likewise the ISM manufacturing index issued on Monday at 57.8 for June was considerably better than the 55.2 forecast and May's 54.9 reading.  It was the best score for U.S. factories since August 2014. 

New orders in both sectors forged ahead providing a solid lead into the third quarter. The manufacturing index jumped to 63.5 from 57.5 and service business climbed to 60.5 from 57.7.  A score above 50 indicates expansion and one below connotes contraction. 

Business activity in the service sector which constitutes between 85-90 percent of the U.S. economy moved to 60.8 in June from 60.7. While this is down from February's six year peak of 63.6 it still the fourth best monthly reading since October 2015. 

The services employment index slipped slightly to 55.8 last month from 57.8 in May though it remains well above the 53.2 average since the beginning of 2016. The same index for manufacturing jumped to 57.2 from 53.5 leaving it far ahead of the 51.6 average of the past 18 months. 

Sixteen non-manufacturing industries expanded in June, including wholesale trade, transportation and professional, scientific and technical services.

Annualized economic growth in the second quarter is currently estimated by the Atlanta Fed's GDPNow model to be running at 2.7 percent, down from the prior forecast of 3.0 percent on July 3rd but a substantial improvement over the 1.4 percent pace in the first quarter and the 2.1 percent rate in the final quarter of last year.

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

Charts: Thomson/Reuters

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