Economy

Economic Data Roundup (07/06/2016)

7/6/16 12:00 PM

iStock_000009946822_Small.jpgThere were two important reports on the U.S. economy released this morning. First, the services sector purchasing managers' index (PMI) from Markit Economics ended June at 51.4, up slightly from May but still near the low end of the range for the past few years. Any reading above 50 implies activity expansion in the services sector (which accounts for a much larger portion of the U.S. economy than manufacturing), and many surveyed managers reported that client spending is improving. However, some respondents said that “subdued business confidence and heightened economic uncertainty had acted as a brake on growth in June,” and the gauge of managers’ business expectations for the year ahead continued to soften. Further, the rate of jobs growth eased to the weakest level in 17 months due to "economic uncertainty and a lack of pressure on operating capacity." On the bright side, new work improved last month, and the overall rate of input price inflation eased to a 3-month low. More encouraging is the Institute for Supply Management’s (ISM’s) non-manufacturing index, also released this morning, which jumped to 56.5 in June. That is significantly better than economists expected, the highest reading in more than a year, and the largest month-over-month gain since 2008. ISM’s gauges of non-manufacturing business activity and new orders both signaled growth for the 83rd consecutive month in June, and measures of employment, inventories, and foreign trade also improved. Comments submitted by surveyed managers last month were generally positive but Markit's chief economist Chris Williamson remained cautious, stressing that "Service sector confidence has slumped to the lowest since 2009 alongside ongoing woes in the energy and manufacturing sectors, as well as worries about the outlook amid presidential election uncertainty." He added that “While volatile official GDP numbers are widely expected to show a rebound from a lackluster start to the year, the PMIs suggest the underlying malaise has not gone away. The surveys point to an annualized pace of economic growth of just 1% in the second quarter.”

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Sources: Econoday, Twitter, ZH, Markit Economics, ISM, FRBSL

Post author: Charles Couch