U.S. Services Sector Growth Cools in June But Remains High -- IHS Markit

By Xavier Fontdegloria

Services sector activity in the U.S. eased somewhat in June compared with the previous month, but continued to expand at strong levels driven by a rise in client demand, data from IHS Markit showed Tuesday.

The final U.S. Services Purchasing Managers' Index for June came in at 64.6, down from 70.4 in May and below the flash estimate of 64.8. Economists polled by The Wall Street Journal expected the final services PMI to come in at 65.2.

The reading signals a strong and broad-based growth rate for the services sector, as it is well above the 50-point threshold that separates expansion from contraction.

"June saw another month of impressive output growth across the manufacturing and services sectors of the U.S. economy, rounding off the strongest quarterly expansion since data were first available in 2009," said Chris Williamson, chief business economist at IHS Markit.

Expansions in output and new orders remained robust, but the rate of growth cooled compared with May, adding to signs that the services economy's recovery bounce peaked in the second quarter.

"Some of the easing in the rate of expansion reflects payback after especially strong expansions in prior months as the economy opened up from pandemic-related restrictions, especially in consumer-facing companies," Mr. Williamson said.

Backlogs of uncompleted orders are rising at a rate unprecedented in the survey's history, signaling that supply bottlenecks continue to constrain output.

Input price inflation eased from the recent high registered in May, but services providers continued to report rising supplier, fuel and wage costs, the report said. These costs were partially passed on to customers. "Capacity constraints are not only stifling growth, but also driving prices sharply higher," Mr. Williamson said.

Firms continued to hire new workers, but challenges finding suitable candidates weighed on the pace of job creation, IHS Markit said.

Write to Xavier Fontdegloria at [e-mail]

(END) Dow Jones Newswires

07-06-21 1019ET