MNI INTERVIEW: US Services Growth Seen Gaining Momentum - ISM
The U.S. services sector returned to growth in June and is likely to build momentum through the summer even as the global trade war created some weakness in hiring, Institute for Supply Management chair Steve Miller told MNI Thursday.
The ISM composite increased 0.9ppt to 50.8 last month, matching market expectations, and above its neutral threshold of 50, where it has been in 11 of the past 12 months. Details in the June survey were mixed as new orders and business activity increased while the employment index fell below 50.
"It's a very positive report, given the uncertainty around tariffs and fiscal policy," Miller said. "With all of that uncertainty in the June timeframe and still seeing business activity up and new orders up significantly, I think that that's a very positive sign."
Miller is optimistic the ISM composite will increase in coming months. "We're going to see the supplier delivery go higher. I think we're going to start seeing some additional new orders going in, which will be another positive on the new order side. It's going to stay above 50," he said.
"Business activity is going to increase as well, and with business activities, supplier deliveries, and new orders all increasing, I'd be surprised if by the end of the summer we're not up around 55," Miller said about the PMI. (See: MNI INTERVIEW: Miran Sees US Trade Deal 'Flurry,' 3% H2 GDP)
HIRING FREEZES, NOT LAYOFFS
ISM's employment index softened to 47.2 from 50.7 in May, the lowest since March, but Miller downplayed concerns.
"Seeing the employment drop below 50 again was probably the bigger disappointment, showing that there's still uncertainty about where the economy is headed," he said. "The commentary was hiring freezes, delaying rehiring of open positions, and that type of thing, not extensive layoffs."
