The ISM Non-Manufacturing Index for June declined to 55.1 from 56.9 in May, but remained in line with the middling pace of activity that has characterized 2019 to-date. Three of four components were lower, but overall conditions read as relatively stable and moderately expansive. Survey respondents are clearly concerned about the impacts of tariffs on prices and supply chains, but not as much about business conditions. The report said the non-manufacturing sector has been growth for 113 straight months. In comparing it to the Manufacturing Index, conditions are steadier and stronger for services.
The business activity index fell (58.2 in June after 61.2 in May), but this remains a robust pace. New orders declined (55.8 after 58.6) to its lowest level since 54.5 in December 2017. Order backlogs rose (56.0 after 52.5) indicating that there is work in the pipeline to smooth over some month-to-month bumps. The employment index dipped (55.0 after 58.1) but is not much different than other readings so far in 2019 and consistent with expanding workforces. Supplier delivery times returned above neutral (51.5 after 49.5) but are generally showing that items are moving neither too fast nor too slow. Inventories rose (55.0 after 54.0) but not yet to sustained elevated levels that might cause alarm. Inventory sentiment was unchanged at 58.5 in June.
Prices paid were up (58.9 in June after 55.4 in May) as higher costs associated with tariffs — real or pretext — are making their way along the supply chain even though energy costs fell in the month.
The indexes for export orders (unchanged at 55.5 in June) and imports (unchanged at 50.0) indicated that orders for services from outside the US continue to expand modestly while imports are being carefully managed.
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