U.S. Service Sector Has Better June Than Expected
by Jason Simpkins
While other areas of the economy continue to falter, the U.S. service sector enjoyed an unexpected boost in June. This flexing of previously dormant muscle was evidenced by the Institute of Supply Management’s services index, which rose from 59.7 to 60.7. A number above 50 indicates growth in the sector.
This move defied expectations, as the index was expected to drop to 58. The survey’s employment index also edged up to 55 – its highest level in more than a year.
Coupled with a strong manufacturing report, the surprise jump in service-sector activity was viewed as evidence the U.S. economy has more growth potential than economists previously thought.
“It’s good news for the economy,” said David Wyss, chief economist for Standard & Poor’s in New York.
The still-weak U.S. dollar is helping fuel manufacturers who export their goods, since the falling dollar makes U.S. goods cheaper for overseas consumers to buy. Even so, the country continues to run a huge trade deficit.
A series of reports on job trends has corroborated the ISM’s findings. ADP Employer Services said U.S. private employers likely added 150,000 jobs in June, far outstripping the projected estimate of 100,000.
Additionally, employment consulting firm Challenger, Grey, and Christmas Inc. found that planned U.S. layoffs dropped 22% in June. However, the firm also pointed out that deficiencies in a floundering housing market caused cutbacks to accelerate in the financial sector.
Regardless, the news is a forward step for slipping consumer confidence. Late last month the Conference Board Consumer Confidence Index dropped from 108.5 to 103.9. Those expecting business conditions to worsen, edged up to 11% from 10.2%, while those anticipating fewer jobs also increased to 17% percent from 15.6%.
