Non-Manufacturing ISM Stronger Than Expected

In June, non-manufacturing ISM rose to 60.7 (consensus 58), an increase from the prior month's rebound to 59.7. This puts the non-manufacturing ISM at its highest level since April 2006. Non-manufacturing activity has now expanded for over 50 straight months.

All 14 business categories recorded growth in June, but the pace of growth is slower than in May, based on the fact that both new orders (56.9) decreased in May. Prices (65.5), though softer, are still at a high level, and suggests inflation remains a concern. Inventories fell a tremendous 8.5 points to 52.5. New export orders also showed a decline of -7 points to 59, indicating most of the strength was domestic.

Non-manufacturing ISM focuses on the service sector of the economy, which is the fastest growing area. This survey is based on responses to a survey of purchasing and supply executives about their businesses. Strength in services should support employment growth tomorrow as the service sector has been the major creator of new jobs recently. Employment held recent gains to remain relatively steady at 55.

Based on the comments, it appears that business is generally stable, and better than last month, but still depressed versus a year ago. The components don't seem to show the strength of the headline figure.