The U.S. services sector expanded in June as the non-manufacturing business activity composite index was 57.4 in the month, compared to 56.9 in May, on a seasonally adjusted basis, the Institute for Supply Management reported Wednesday.

An index reading below 50 signals a slowing economy, while a level above 50 suggests expansion.

Economists polled by Thomson Reuters had expected a 56.5 level.

The prices paid index rose to 52.1 from 49.2.

The employment index dipped to 55.8 from 57.8.

The business activity/production index grew to 60.8 from 60.7, the new orders index was at 60.5, up from 57.7; backlog of orders dropped to 52.5 from 57.0; new export orders increased to 55.0 from 54.5; inventories gained to 57.5 from 54.0; inventory sentiment fell to 62.0 from 63.0; the supplier deliveries index grew to 52.5 from 51.5; and imports increased to 51.0 from 48.5.

Members' general comments on business in the month included:

  • “Labor continues to be constrained in the construction industry, driving cost increases. Regional unemployment rate of 2.7 percent is making hiring difficult on all phases of the construction supply chain.” (Construction)
  • “Off to a very strong start – 2017 YTD results above 2016 actual and 2017 target. Expect trend to continue. Very positive outlook for our business.” (Finance & Insurance)
  • “We continue to struggle with the unknowns surrounding Obamacare, whether it will be repealed, or replaced, and if replaced what does it mean for our health services business, as well as our health plans business.” (Health Care & Social Assistance)
  • “Activity level continues to climb in the oil and gas sector with supply in certain spend categories continuing to tighten.” (Mining)
  • “June has been quite a busy month in terms of internal food activity. Seasonal increases in beef and poultry overall. Produce has remained steady with some early summer items coming down in price as product moves from Mexico to California growing regions. Dairy slightly up due to summer season cream production increase.” (Accommodation & Food Services)
  • “General overall optimism in economy. Still job growth issues with mismatch in available labor pool and jobs available.” (Professional, Scientific & Technical Services)
  • “Activity is increasing due to full budget appropriations.” (Public Administration)
  • “Overall business is trending up and we have a positive outlook for 2017.” (Retail Trade)
  • “Several positive signals as we approach [the] third quarter.” (Wholesale Trade)

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Gary Siegel

Gary Siegel

Gary Siegel has been at The Bond Buyer since 1989, currently covering economic indicators and the Federal Reserve system.