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US services firms saw slight June acceleration; increase in business activity and new orders

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WASHINGTON — U.S. service firms grew at a slightly faster pace in June, as business activity and new orders increased.

The Institute for Supply Management said Monday that its services index edged up to 56 in June from 55.7 in May. Any reading over 50 indicates that services firms are expanding.

Steady hiring over the past year has fueled a consumer spending rebound from a winter slump. Many economists say the economy will expand at an annual rate of 2.5 per cent in the second quarter, after shrinking during the first three months of 2015.

Still, the index's hiring component slipped in June to 52.7 from 55.3 in May, which indicates that the rate of job growth might slow.

PHOTO: In this June 26, 2015 photo, Eric Peterson, 47, at left, and Joe Millspaw, 19, of Advanced Concrete Floor Finishes of Findley Lake, N.Y., paint the surface of the swimming pool at Rodger Young Park in Erie, Pa. U.S. service firms grew at a slightly faster pace in June, as business activity and new orders increased. (Christopher Millette/Erie Times-News via AP)
In this June 26, 2015 photo, Eric Peterson, 47, at left, and Joe Millspaw, 19, of Advanced Concrete Floor Finishes of Findley Lake, N.Y., paint the surface of the swimming pool at Rodger Young Park in Erie, Pa. U.S. service firms grew at a slightly faster pace in June, as business activity and new orders increased. (Christopher Millette/Erie Times-News via AP)

"This was a mixed but still decent report on the U.S. economy," said Jennifer Lee, a senior economist at BMO Capital Markets.

The report corresponds with economic growth of around 3 percent annually in the second quarter, Lee said.

The ISM is a trade group of purchasing managers. Its survey of services firms covers businesses that employ 90 per cent of workers, including retail, construction, health care and financial services companies.

The increase in the broader index points to increasing demand for services from consumers and companies. Business activity climbed last month to a reading 61.5, up from 59.5. The levels for new orders ticked up to 58.3 from 57.9 in May.

"The overall business outlook remains strong and performance in our market has been very good," one retailer said in the ISM's survey.

The majority of the 18 sectors in the survey expanded last month, although both construction and mining firms contracted.

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