U.S. Service Index Indicates Slightly Faster Growth In June

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Activity in the U.S. service sector expanded at a modestly faster rate in the month of June, according to a report released by the Institute for Supply Management on Monday, although the index of activity in the sector rose by slightly less than expected.

The ISM said its non-manufacturing index inched up to 56.0 in June from 55.7 in May, with a reading above 50 indicating growth in the service sector. Economists had expected the index to rise to 56.4.

The modest uptick by the headline index came amid an increase by the business activity index, which rose to 61.5 in June from 59.5 in May.

The new orders index also showed a modest increase in demand, edging up to 58.3 in June from 57.9 in the previous month.

On the other hand, the employment index fell to 52.7 in June from 55.3 in May, indicating a slowdown in the pace of job growth in the service sector.

The prices index also slid to 53.0 in June from 55.9 in May, pointing to a slowdown in the pace of price growth during the month.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "With the headline index still at a healthy level and the business activity index rebounding too, the drop in the employment index is not too much of a concern, particularly not when we already know that payrolls increased by a relatively healthy 223,000 in June."

Last Wednesday, the ISM released a separate report showing that its manufacturing index rose by slightly more than expected in June.

The ISM said its purchasing managers index rose to 53.5 in June from 52.8 in May. Economists had expected the index to edge up to 53.2.

With the slightly bigger than expected increase, the manufacturing index reached its highest level since a matching reading in January.

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