U.S. Service-Sector Growth Picks Up in June

The U.S. service sector plodded along in June, according to data released Monday by the Institute for Supply Management. Respondents were generally upbeat about the economy. The ISM's nonmanufacturing purchasing managers index edged up to 56.0 in June from 55.7 in May. Forecasters surveyed by The Wall Street Journal had expected last month's PMI to rise to 56.3. "The service sector continues to expand at a solid pace, but the pace of expansion is no longer accelerating," wrote economists at Jefferies in a research note. Earlier Monday, data provider Markit said its service-sector composite fell to 54.8 in June from 56.2 in May. Markit said output and employment growth each slowed in June. As with the ISM, Markit readings above 50 indicate activity is expanding. In the ISM nonmanufacturing report, the indexes of various business activities were mixed but remained in expansion territory. "The majority of respondents' comments are positive about business conditions and the economy," the report said. The business activity/production index increased to 61.5 from 59.5. The ISM's new orders index rose to 58.3 from 57.9 in May. The exports index slowed to 52.0 after it jumped to 55.0 from 48.5 in April. The ISM employment index weakened to 52.7 from 55.3. Last Friday, the Labor Department reported that private service companies accounted for the bulk of the 223,000 new jobs added in the U.S. economy in June. Anthony Nieves, who oversees the survey for the ISM, said he wasn't worried about the employment index. "Hiring typically slows in the summer" for many nonmanufacturing companies, he said. Still, he added the index bears watching into the fall. The ISM prices index came in at 53.0 from 55.9. One item up in price for the last two months is eggs. Respondents cited the avian flu as causing problems in the poultry industry, said Mr. Nieves. The ISM nonmanufacturing report is comprised mainly of comments from service-sector companies that make up the bulk of the U.S. economy, but it also includes construction and public administration.