Service sector

US service sector activity cooled in June; employment measurement contracts – ISM survey

WASHINGTON, July 6 (Reuters) – U.S. service-sector activity grew at a subdued pace in June, likely dampened by labor and raw material shortages, leading to a buildup continues unfinished work.

The Institute for Supply Management said on Tuesday its non-manufacturing activity index fell to 60.1 last month from 64.0 in May, which was the highest reading in the series’ history.

A value above 50 indicates growth in the service sector, which accounts for more than two-thirds of US economic activity. Economists polled by Reuters had forecast the index falling to 63.5.

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The economy has been hit by labor and raw material shortages as it reopened after more than a year of disruption caused by the COVID-19 pandemic. More than 150 million people are fully immune to the coronavirus, prompting the lifting of pandemic-related restrictions on businesses and mask mandates, helping demand return to services from goods.

The survey’s order book measure rose to a reading of 65.8 from 61.1 in May. New orders have remained healthy and there is ample room for strong gains in the months ahead as inventories contract in June. Inventory sentiment among customers remained poor. Business inventories ran out in the first quarter due to pent-up demand.

With supply constraints showing no signs of easing, companies continued to pay more for inputs. The survey measure of prices paid by service industries fell to a still-high 79.5 from 80.6 in May, which was the highest reading since September 2005. The continued rise supports the opinion of some economists that higher inflation is proving more persistent than currently expected. by the Federal Reserve.

Fed Chairman Jerome Powell has repeatedly said the rise in inflation will be transitory, noting he expects supply chains to normalize and adapt, views also shared by Treasury Secretary Janet Yellen.

The Fed’s preferred inflation measure for its 2% target, the personal consumption expenditure price index excluding the volatile components of food and energy, jumped 3.4 % year-on-year in May, the largest increase since April 1992. read more

The ISM survey’s service employment measure fell to 49.3 in June from 55.3 in May. There is, however, cautious optimism that the labor shortage is beginning to ease.

The government announced on Friday that non-farm payrolls rose by 850,000 jobs in June, the biggest increase in 10 months, after increasing by 583,000 in May. Read more

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Reporting by Lucia Mutikani Editing by Chizu Nomiyama

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