Economic activity in the US services sector increased in June but at a slower rate than May, according to the Institute for Supply Management’s Services ISM Report on Business released Wednesday.
The ISM’s Services PMI dropped to a level of 55.3% in June from 55.9% in May. This is the lowest reading since May 2020, when the index registered 45.2%. However, the index indicated growth for the 25th consecutive month after a two-month contraction in April and May 2020. Readings above 50.1% indicate expansion over time.
The slight slowdown in June’s services sector growth was due to a decline in new orders and employment, according to Anthony Nieves, chair of the ISM’s Services Business Survey Committee.
“According to the Services PMI, all 18 industries reported growth,” Nieves said. “Growth continues but slower for the services sector, which has expanded for all but two of the last 149 months. Logistical challenges, a restricted labor pool, material shortages, inflation, the coronavirus pandemic and the war in Ukraine continue to negatively impact the services sector.”
The report noted that employment activity in the services industry contracted in June for the third time in the last five months.
Comments from respondents include:
- “Business continues to stay steady amid rising interest rates, a lack of labor, inflation, transportation problems and high gas/diesel prices. Outlook is measured due to economic headwinds.”
- “Staffing employment challenges have resurfaced, and costs have dramatically increased on core needs, led by soybean oil products. Rise in diesel fuel affecting almost everything.”
ISM’s data is based on a survey of purchasing and supply executives across the US.