In June, the ISM service sector index revealed a larger-than-expected drop. The fall in the June ISM Services index from its record high last month, according to Wells Fargo analysts, is indicative of the fiscal and reopening tailwinds beginning to wane. They note that bottlenecks are showing promising signs of lessening and, eventually, allaying some price pressures, but they caution that there is still a long way to go until things look anything like they do now “”Regular”. The ISM Services index fell nearly four points in June after reflecting a record pace of increase last month. The indicator, at 60.1, indicates that activity will stay high this summer, but that fiscal and reopening tailwinds are beginning to fade. The reduced growth in current activity (down 5.8 points to 60.4) and new orders (down 1.8 points to 62.1) in June can be ascribed in part to supply constraints, particularly for labor.”
“Employment was the biggest drag on the composite reading in June. In contrast to the significant boost in services employment (+642K net jobs) published in last week’s employment report for June, the hiring index slipped below the all-important 50 level denoting expansion.”
“Parts, materials, and labor costs are continuing to rise due to a lack of supply. Although the prices paid component fell 1.1 points to 79.5 in June, it was the sixth month in a row that the index was above 70, and it was the second highest level since 2008. With the exception of agriculture, all industries reported greater prices paid throughout the month.”/n
