US services returned to growth in June: Survey

06 Jul 2020 / 23:23 H.

WASHINGTON: The US services sector grew in June after the coronavirus pandemic caused its steepest-ever contraction the month prior, an industry survey said today.

The Institute for Supply Management's (ISM) non-manufacturing index was at 57.1% in June, well above expectations and an increase of 11.7 percentage points from May – the biggest one-month jump ever.

Anything above 50% indicates expansion in the sector crucial to the world's largest economy.

The index's reading of 45.4% in May was down 10.7% from the month prior and part of a two-month stretch of contraction as the pandemic forced businesses closed nationwide, but the latest June data indicates activity has resumed, at least tentatively, even if the virus remains a threat.

"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," the survey's chair Anthony Nieves said in a statement.

New orders were up nearly 20 points at 61.6%, business activity was up a quarter to 66% while employment jumped 11.3 points to 43.1%, though that indicator remained in contraction.

ISM's supplier deliveries index decreased to 57.5%. The index is inversed, meaning a number above 50 indicates slower deliveries, and Nieves said the index in June "now more closely correlates to current supply and demand."

Of the 17 industries surveyed, only three did not report growth in June, according to ISM. Many survey respondents cited moves to ease the business lockdowns as beneficial, but noted things are not back to normal yet.

"Let's not get too complacent, [as] Covid-19 is still a pandemic, [and] a vaccine has not been developed," an accommodation and food services business told ISM.

However with the United States recording nearly 40,000 new coronavirus cases in 24 hours on Sunday, the pandemic remains out of control and Oxford Economics warned it will hamper the sector's recovery in the second half of the year.

"The concerning trajectory of the virus in recent weeks will be the key impediment constraining the recovery as many states have now paused or rolled back their reopening plans due to a spike in cases," Oxford said in a note. – AFP

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