U.S. Non-Manufacturing Sector Swings to Expansion in June - ISM

The non-manufacturing sector in the U.S. returned to growth in June as the country continued to reopen, data from a survey compiled by the Institute of Supply Management showed Monday.

The ISM Non-Manufacturing Report on Business PMI for June climbed to 57.1%, up 11.7 points from the May reading of 45.4%, surpassing the 50% no-change mark for the first time since the pandemic hit the U.S. This is the largest single- month increase in the index since its debut in 1997.

Economists polled by Dow Jones Newswires expected the PMI to be at a smaller level of 50.1%.

ISM compiles the PMI from a survey of supply executives whose responses reflect the change, if any, in the current month compared with the previous one in certain areas of business activity. Non-manufacturing sector includes industries such as finance, agriculture, real estate, construction and retail trade.

A PMI reading above 50% indicates that the non-manufacturing economy is generally expanding, while below 50% indicates that it is generally declining.

The business activity index registered 66%, up 25 percentage points from May's figure of 41%. New orders stood at 61.6%, up 19.7 percentage points compared with the prior month.

The employment index, despite increasing by 11.3 percentage points, remained in contraction territory at 43.1%.

"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," said Anthony Nieves, chair of the Institute for Supply Management Non-Manufacturing Business Survey Committee.

June's non-manufacturing PMI also signalled that the U.S. overall economic activity is growing, as a reading above 48.5% over time generally indicates an expansion of the overall economy. This is the first time since March in which the PMI indicates such expansion.

Among the 14 non-manufacturing industries reporting growth in June, there are wholesale trade, real estate, finance and insurance, construction, and healthcare and social assistance. The three industries reporting a decrease in June are mining, management of companies and support services and other services.

"Businesses are starting to reopen and the economy seems to be on the road to recovery, but let's not get too complacent, as Covid-19 is still a pandemic, and a vaccine has not been developed," said one respondent from the accommodation and food services industry.

Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com


  (END) Dow Jones Newswires
  07-06-20 1047ET
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