Service sector PMI rises to 53.9%, above forecast of 51.3% and the sixth consecutive month of expansion
The numbers: An ISM barometer of business conditions at service sector companies such as restaurants and hotels rose to 53.9% in June from 50.3% in the prior month.
That was much higher than expected. Economists polled by the Wall Street Journal had expected the index to rise to 51.3%.
This is the sixth consecutive month the index from the Institute of Supply Management has been over 50%, the threshold for expansion.
Key details: Fifteen out of 18 industries reported growth in June. New orders, activity and employment all increased. The majority of respondents indicate that business conditions remain stable, but they are cautious relative to inflation and the outlook.
Economists said a key number in the report was the employment index, which rose 3.9 points to 53.1
The prices component slowed down to 54.1% from 56.2% in May.
A separate report from S&P Global showed its service sector activity index rose to 54.4 in June from the “flash” estimate of 54.1. This was down from 54.9 in May.
Big picture: The service sector and consumer spending has been driving the economy this year. The June data don’t signal any slowdown.
Service sector executives had been worried about a recession but no longer are as worried, said Anthony Nieves, chair of the ISM services business survey committee.
What economists are saying? “Outright contractionary readings for business activity and a retreat in the new orders result will likely be necessary before services providers cut back on spending and investment of their own to accommodate ongoing demand. So long as customers continue to walk through the door and click through to web addresses, businesses will remain confident in hiring workers and passing on the rising cost of labor to their customers,” said Kurt Rankin, senior economist at PNC Financial Services.
Market reaction: Stocks DJIA, -1.07% SPX, -0.79% were lower as the economic data suggested the Federal Reserve has a green light to continue to raise interest rates. The yield on the 10-year Treasury note TMUBMUSD10Y, 4.047% rose above 4%.