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Economy in Brief

U.S. ISM Services Index Backpedals in June
by Tom Moeller  July 6, 2021

• June's decline was more than expected.

• Weakening cuts across sub-categories.

• Pricing power eases from near-record level.

The Composite Index of Services Activity declined to 60.1 during June from 64.0 in May. It was the lowest level since February. A decrease to 63.8 had been expected in the Action Economics Forecast Survey. Despite the decline, it was the thirteenth consecutive month indicating positive growth. The report of weakening in service sector business activity follows last week's report of an easing in factory sector business.

Haver Analytics constructs a composite index combining the services index and the manufacturing reading. The composite index fell to 60.2 last month from 63.7 in May. During the last 10 years, there has been a 53% correlation between the index level and the q/q change in real GDP. The composite is based on GDP shares.

Declines in the services sub-index series were widespread during June. The business activity reading fell to 60.4, its lowest point since February. The new orders reading backpedaled to 62.1 as a lessened 42.0% (NSA) of respondents reported higher new orders and an increased 14.2% reported a decline. The employment reading fell to 49.3, indicating a decline in hiring for the first time in six months. The supplier delivery index eased to 68.5 from 70.4. A lessened 39.9% (NSA) of firms reported slower delivery speeds while a higher 3.0% reported them quicker.

The prices index weakened to 79.5 last month after rising to 80.6 in May. A lessened 62.9% of respondents reported higher prices while an increased 1.2% reported price declines. The percentage reporting no change in prices rose slightly to 35.9% but remained well below its 80.4% high in February of last year.

The order backlog index increased to a record 65.8. The export orders series fell sharply to 50.7, its lowest point since January. The imports index rose sharply to 58.2, the highest level since April 2013. These series are not seasonally adjusted and are not included in the nonmanufacturing composite.

The ISM figures are available in Haver's USECON database, with additional detail in the SURVEYS database. The series dates back to July 1997. The expectations figure from Action Economics is in the AS1REPNA database.

ISM Services Survey (SA) Jun May Apr Jun '20 2020 2019 2018
Services PMI 60.1 64.0 62.7 56.5 54.3 55.5 59.0
   Business Activity 60.4 66.2 62.7 63.9 55.8 58.0 61.6
   New Orders 62.1 63.9 63.2 61.8 55.6 57.6 61.5
   Employment 49.3 55.3 58.8 42.7 46.0 55.0 56.9
   Supplier Deliveries (NSA) 68.5 70.4 66.1 57.5 59.7 51.5 55.8
Prices Index 79.5 80.6 76.8 62.1 58.6 57.5 62.0
ISM Mfg. & Services (Haver Composite) 60.2 63.7 62.5 56.0 54.1 55.0 58.9
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