Services Sector Report Indexes Positive

The PMI services sample reported slightly less modest conditions in the latter half of June, pulling the index up to a better-than-expected 51.5. The composite, reflecting the size of the services sector, also ended June at 51.5 with manufacturing's 50.6 showing (data released on Monday) having no impact.

For services, new orders picked up slightly last month as did new export orders as well as backlogs which are favorable indications for this month's business activity. Yet confidence in the lookout eased further and is at a 7-year low. The sample increased their employment in the month and inflationary pressures were muted.

...meanwhile...

However much economic data have been slowing, this trend does not include ISM's non-manufacturing sample which had a very healthy month in June. The 55.1 composite is a slight 7 tenths lower than Econoday's consensus and is also a more sizable 1.8 points below May -- but the level is very healthy.

New orders did slow by nearly 3 points but again the 55.8 showing is solid and sustainable. Employment is similar, also down roughly 3 points but at a healthy level of 55.0, with business activity (production) likewise 3 points lower but at 58.2 points to strong activity for the sample. Costs for the sample edged higher to 58.9.

This is a very favorable report and is a reminder that the fundamental momentum of the economy, despite the Federal Reserve's heightened concern over manufacturing, is solid.