US services sector heats up in June

(MENAFN- AFP) The massive US services sector picked up pace in June to the strongest growth in seven months, according to a private monthly survey published Wednesday.

The Institute for Supply Management said its purchasing managers index for the non-manufacturing sector rose to 56.5 in June from the May reading of 52.9. A reading above 50 indicates growth.

"Respondents' comments are mostly positive about business conditions and the economy," said Anthony Nieves, chair of the ISM survey committee for the sector. "Overall, the report reflects a strong rebound from the 'cooling-off' of the previous month."

The June PMI level was the highest since November 2015, and slightly above the average for the past 12 months. The consensus estimate was for a more modest increase to 53.3.

The 3.6-point jump from May to June in the sector was the biggest since February 2008, noted Jay Morelock at FTN Financial.

"The service sector represents 70 percent of the US economy and the chances of dramatic slowdown in the US economy are reduced," Morelock said.

"A resurgent service sector heading into Q3 should boost confidence that the economy can withstand current volatility," he said, pointing out that the survey was conducted before Britain's June 23 vote to leave the European Union.

Gains were broad-based across categories in June. Production, new orders and imports grew faster. Employment and the backlog of orders swung from contracting to growing.

Of the 18 industries surveyed, the 15 reporting growth in June were led by mining as oil prices pushed higher from a first-quarter slump.

"Oil prices seem to be stabilizing in the $48/barrel range which has eased the panic in the industry over falling prices," said one survey respondent in the mining sector.

In the construction industry, one purchasing manager said: "Business is strong in the private sector; bidding a lot of commercial buildings."

"Overall business conditions are good, even though growth is flat," said a person in the health care and social assistance industry.