Non-Manufacturing Sector Rebounds in June



According to the June Non-Manufacturing ISM Report on Business, the non-manufacturing sector experienced growth in June as the non-manufacturing index (NMI) rose to 56%, a slight increase over the 55.7% recorded in May, which was the lowest it had fallen in the last 12 months.

Even during the low point in May, the NMI has continued to be an indicator that the economy is headed in a positive direction. When the NMI rises above 48.7 it is evidence of an economic expansion, whereas a reading below that number is indicative of a contraction. June’s NMI was above the threshold for expansion for the 65th consecutive month, while the non-manufacturing business activity index, which shot up to 61.5%, reflected growth for the 71st month in a row.

“The past relationship between the NMI and the overall economy indicates that the NMI for June corresponds to a 3.1% increase in real gross domestic product on an annualized basis,” said Anthony Nieves, chair of the Institute for Supply Management.

ISM’s non-manufacturing new orders index has also been on the positive side for quite some time and that continued in June, with the index hitting 58.3%, marking the the 71st straight month it has grown.

Employment activity lagged a bit during the month, with the ISM non-manufacturing employment index reading at just 52.7%, which was below the 55.3% recorded in May. Mining continues to be hit hard as it was one of three industries to report a reduction in employment during June. The mining industry also reported declines in business activity and new orders during the month.

As the economy continues to point upward so do prices. Of the 16 industries surveyed, 11 reported increases in prices paid, leading to a 53% reading in the ISM non-manufacturing prices index.

Supplier deliveries (51.%), backlog orders (50.5%), new export orders (52%) and inventory sentiment (65%) all experienced increases in June, while imports contracted to 48% after four months of growth.


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