The ISM Non-Manufacturing Index Increased to 56.0 in June

Implications: Service sector activity in 2015 has shown the fastest growth to start a year going back to 2005. While the ISM service sector report came in slightly below expectations for June, it showed accelerating growth from May and represents expansion for a 65th consecutive month. Of the eighteen industries reporting, fifteen showed growth in June, led by arts, entertainment & recreation as well as real estate, rental, & leasing. The business activity index, which has a stronger correlation with economic growth than the overall index, rose to a robust 61.5, while the new orders index, the most forward looking measure of service sector activity, increased to 58.3. Both the business activity and new orders indexes accelerated from the first quarter of the year, signaling a rebound from the impacts of an unusually cold winter and West Coast port strikes that slowed orders. Expect activity to remain strong over the coming months as companies move to fill the steady flow of new orders coming in. The employment index dipped in June to 52.7, as declines in mining, "other", and information services offset rising employment in thirteen of the remaining fifteen industries. Remember, levels above 50 represent growth, so this still-elevated level represents continued improvement in the job market, just at a slightly slower pace than in recent months. On the inflation front, the prices paid index fell 2.9 points in June to 53.0, as agriculture and fuel prices continue to rise, but at a slower pace than last month. Over the coming months, rising fuel costs will likely continue to be a key driver pushing prices higher. As a whole, today's report suggests continued growth in the months ahead and an uptick in activity for the second half of 2015.

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Posted on Monday, July 6, 2015 @ 11:07 AM

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.