U.S. Service Sector Activity Shows Substantial Turnaround In June

In the latest sign of the rapid economic recovery, the Institute for Supply Management released a report on Monday showing a substantial turnaround in U.S. activity in the month of June.

The said its non-manufacturing index spiked to 57.1 in June from 45.4 in May, with a reading above 50 indicting an increase in service sector activity. Economists had expected the index to climb to 50.1.

The sharp increase by the non-manufacturing index reflected the largest single-month percentage-point increase since its debut in 1997.

“The non-manufacturing composite index indicated growth after two consecutive months of contraction,” said Anthony Nieves, Chair of the ISM Non-Manufacturing Business Survey Committee.

He added, “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.”

The much bigger than expected increase by the headline index came as the business activity index skyrocketed to 66.0 in June from 41.0 in May and the new orders index soared to 61.6 from 41.9.

The employment index also jumped to 43.1 in June from 31.8 in May, although the reading below 50 indicates employment in the service sector contracted for the fourth month in a row.

The report also said the prices index surged up to 62.4 in June from 55.6 in May, reflecting the largest monthly increase since August of 2012.

Last Wednesday, the ISM released a separate report showing U.S. manufacturing activity unexpectedly expanded in June after three straight months of contraction.

The ISM said its purchasing managers index jumped to 52.6 in June from 43.1 in May, with a reading above 50 indicating an expansion in manufacturing activity.

Economists had expected the index to climb to 49.5, which have still indicated a modest contraction in manufacturing activity.

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