The June U.S. Services Purchasing Managers' Index (PMI) from S&P Global rose 0.5 points to 51.2, indicating a modest rise in service sector activity. The latest reading was just below the forecast of 51.3 and marked the strongest expansion in four months.
From the latest press release, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said:
“A slight acceleration of business growth in the services economy takes the expansion to the strongest since the outbreak of the war in the Middle East, though the pace of growth remains lackluster compared to that seen at the start of the year before the conflict. The survey data are hence broadly indicative of the economy only growing at a 1.2% annualized rate over the second quarter.
“Similarly, while business growth expectations for the year ahead improved in June, they remained subdued compared to that seen prior to the war as businesses lack clarity over the outlook, both from economic and geopolitical contexts. The prospect of higher interest rates also acted as a further headwind to growth, notably in the financial service sector, where business expectations remain especially muted.
“A key underlying factor behind the relatively subdued performance of the services economy was again elevated price pressures. Although easing slightly, aided largely by lower oil prices, costs continued to rise at a steep rate in June, driving up rates levied for services. Customer push-back against these high prices was again widely reported, most notably in consumer-facing businesses. Consumer-facing companies are nevertheless reporting that further price falls should help stimulate sales in the months ahead, providing a ray of hope for both the growth and inflation outlooks.”
Background on the S&P Global US Services PMI
The S&P Global US Services PMI™ measures the activity level of purchasing mangers in the services sector through a questionnaire of ~400 service sector companies. The sectors covered include consumer (excluding retail), transportation, information, communication, finance, insurance, real estate, and business services. The S&P Services PMI is a diffusion index, meaning that a reading above 50 indicates expansion in the sector compared to the previous month and a reading below 50 indicates contraction.
Here is a snapshot of the series since mid-2012.
