U.S. ISM non-manufacturing index rises above consensus in June

The ISM non-manufacturing index rose in June. The index was up 0.5 points to 57.4. The headline print came in strongly above market consensus that called for a modest drop to 56.5. Gains were widespread with the majority of the survey components accelerating in June. All the subcomponents are in expansionary territory now, including prices and imports that had previously been in contractionary territory, noted TD Economics.

Amongst the main sub-indicators, new orders rose to 60.5, prices paid were up to 52.1, while business activity also saw a small rise. Meanwhile, the employment sub-index pulled back 2 points to 55.8, after a healthy 6.4 point rose in the prior month.

Comments from survey contacts continued to be greatly positive. Almost all non-manufacturing industries surveyed saw growth in June.

The ISM non-manufacturing index outpaced market expectations in June, and the index continues to be firmly in expansionary territory. Improvements amongst most of the main subcomponents including new orders and business activity, both of which have continued to outperform the overall index for most of the post-recession period, contributed to the encouraging headline print.

While the employment component pulled back slightly, this followed a huge gain in the month prior. In all, the sub-index continues to be on a decent footing compared to the experience of the past two years. The rebound in the prices paid sub-index was encouraging at first glance, with the component moving back to expansionary territory in June.

“While yesterday's minutes from June's FOMC decision suggest that most Fed officials see the recent price weakness largely as transitory, slowing inflation remains the main risk to the pace of policy rate normalization”, stated TD Economics.

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