Posted by Marcelo Perez

The services sector in the US continued to contract in June, but at a slower pace than what was expected, according to the Institute of Supply Management’s non-manufacturing index. This month’s reading is good news for the services sector, as the economy seems to be bottoming out. The NMI came in at 47.0%, above May’s 44.0% reading, and is still confortably above the record-low (37.3%) set in November. Economists had forecast the index to recover slightly, to 46%, so the report was better than expected. Readings above 50% indicate growth, and anything below, contraction.

NMI History

Month	NMI	Month	NMI
Jun 2009	47.0	Dec 2008	40.1
May 2009	44.0	Nov 2008	37.4
Apr 2009	43.7	Oct 2008	44.6
Mar 2009	40.8	Sep 2008	50.0
Feb 2009	41.6	Aug 2008	50.4
Jan 2009	42.9	Jul 2008	49.6
Average for 12 months — 44.3 High — 50.4 Low — 37.4

The Business Activity Index came in at 49.8%, almost as close as it can be without reporting expansion in the index. The new-orders index rose to 48.6%, while the employment index rose to 43.4% from 39.0%.

Six industries reported growth in June - Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Accommodation & Food Services; Finance & Insurance; Construction; and Information.

The 11 industries reporting contraction - Mining; Agriculture, Forestry, Fishing & Hunting; Wholesale Trade; Transportation & Warehousing; Retail Trade; Management of Companies & Support Services; Public Administration; Health Care & Social Assistance; Professional, Scientific & Technical Services; Educational Services; and Other Services.

Note from JYC: A couple more highlights:

Prices paid rose to 53.7; this is not deflation folks.

New export orders rose to 54.5.

Weakest part of the report was inventories and deliveries. The ongoing inventory correction is the biggest drag on GDP growth at this point.

See Full Report.