U.S. service-industry index soars

Reopenings cited for rebound to four-month high in June

An employee works last month at a retail store in Niles, Ill. Service industries make up nearly 90% of the economy.
(AP/Nam Y. Huh)
An employee works last month at a retail store in Niles, Ill. Service industries make up nearly 90% of the economy.
(AP/Nam Y. Huh)

A gauge of U.S. service industries jumped to a four-month high in June and showed the resumption of growth as the economy reopened more broadly from pandemic-induced lockdowns.

The Institute for Supply Management said Monday that its nonmanufacturing index soared a record 11.7 points to 57.1 last month, up from a reading of 45.4 in May. Any reading above 50 means that the service sector is expanding.

At the same time, recent spikes in covid-19 cases threaten to restrain the pace of improvement in services, which make up nearly 90% of the economy.

The rebound at service providers follows a similar jump in the group's manufacturing gauge and indicates that the economy is recovering from its pandemic-related recession.

Last week, the institute reported that its manufacturing index rebounded to a reading of 52.6 after registering big declines in the two previous months.

"Respondents remain concerned about the coronavirus and the more recent civil unrest; however, they are cautiously optimistic about business conditions and the economy as businesses are beginning to reopen," Anthony Nieves, chairman of the institute's non-manufacturing business survey committee, said in a statement.

[RELATED » Interactive: Economic impacts of covid-19 » arkansasonline.com/economy/]

The institute surveys measure changes in activity and can be prone to large swings during turning points in the economy. Businesses are currently facing a variety of hurdles, including elevated unemployment, tepid business investment and weak global demand.

Agriculture, accommodation and food services, wholesale trade and real estate led the 14 industries reporting growth in June, while three industries contracted.

The June advance was the largest point gain in the history of the services index, which goes back to 1997. The April decline in the index had been the biggest point-drop on record. Before the April and May setbacks, the index had been in expansion territory for 122 months.

The purchasing managers' measure of service-related business activity, which parallels the institute's factory production index, jumped a record 25 points to 66 in June, the second-highest ever.

A gauge of new orders climbed nearly 20 points to a four-month high of 61.6.

The institute's measure of services employment, however, remains weak and continues to signal job cuts. The gauge advanced to 43.1 in June from 31.8, but is well below a year-ago level of 55.2 as the pandemic continues to upend the labor market across industries.

The latest figures from the government showed a jobless rate at 11.1% in June compared with 3.5% just before the pandemic. Some 19.3 million Americans also remain on state unemployment benefit rolls.

The institute's index of exports also surged in June, reaching 58.9, the highest since the end of 2018, as economies reopened in other nations.

"We believe the recovery will progress at a slower pace compared to this initial, snap-back phase," said Gregory Daco, chief economist at Oxford Economics. "The concerning trajectory of the virus in recent weeks will be the key impediment constraining the recovery as many states have now paused or rolled back their reopening plans due to a spike in cases."

Daco said it will be difficult for the recovery to gain momentum until businesses and consumers are confident that the worst of the pandemic is over.

Information for this article was contributed by staff members of Bloomberg News and by Martin Crutsinger of The Associated Press.

Upcoming Events