U.S. services firms expand at faster pace in June

By Christopher S. Rugaber
AP Economics Writer

WASHINGTON (AP) — U.S. service companies expanded at a faster pace last month, pushed up by slightly better sales and a pickup in new orders.

The Institute for Supply Management, a trade group of purchasing managers, said Thursday that its services index rose to 57.4 in June, from 56.9 in May. Any reading above 50 indicates expansion. The report covers roughly 90 percent of the economy, from retail and hotels to accounting, government and construction.

The economy appears to be picking up a bit of steam after a sluggish first quarter, when growth was just 1.4 percent at an annual rate. Americans have stepped up their spending, and companies are restocking their shelves and warehouses with new goods. A gauge of inventories jumped 3.5 points to 57.5 last month, the ISM said.

Economists forecast the economy grew at roughly a 2.5 percent pace in the April-June quarter.

A separate survey by the ISM of manufacturing companies found that factory activity expanded in June at the fastest pace in nearly three years.

“The ISM non-manufacturing survey, like its manufacturing counterpart released Monday, showed further strengthening from an already-robust level,” Stephen Stanley, chief economist at Amherst Pierpont Securities, said in a note to clients.

On a less optimistic note, a measure of hiring slipped 2 points to 55.8, which suggests job gains in services may slow when the government issues its employment report on Friday.

Still, a reading of 55.8 indicates companies are adding jobs at a healthy pace. And May’s reading was the highest in nearly two years.

Employers also reported difficulty finding workers to fill open jobs, and said they were raising pay to attract more applicants. Yet wage gains, according to government data, remain weak.