US service sector growth slows from torrid pace — survey

WASHINGTON — The dominant service sector of the US economy continued to grow strongly in June, but at a less red-hot pace amid supply issues and a slowdown in hiring, according to an industry survey released on Tuesday.

After setting a record in May, the Institute for Supply Management (ISM) said its service sector index fell 3.9 points to 60.1, which still indicates a strong expansion. Any reading above 50 indicates growth.

The sector — which accounts for about two-thirds of the US economy — has been growing for 13 consecutive months according to the ISM non-manufacturing index, and has expanded for all but two months for 137 months.

"The rate of expansion in the services sector remains strong, despite the slight pullback in the rate of growth from the previous month's all-time high," survey chair Anthony Nieves said in a statement. 

"Challenges with materials shortages, inflation, logistics and employment resources continue to be an impediment to business conditions."

New orders and deliveries slowed, but hiring actually declined last month after five months of increases, as the employment index dropped six points to 49.3 per cent.

One survey respondent summed up the difficult labor market: "Employees have been somewhat slow to return to work, and there has been turnover as some pursue new opportunities in a hot job market."

The prices index retreated slightly but remains at stunning 79.5 per cent, the survey showed, reflecting rising prices for materials like lumber, fuel and even packaging.

Only two of 18 industries reported a slowdown in June: Real estate and agriculture, ISM said.

"The summer services revival has taken hold," Kathy Bostjancic of Oxford Economics said in an analysis. "Looking ahead, reopenings and rising confidence fuelled by the much-improved health backdrop — despite the recent uptick in cases — will continue to propel the services boom."

She projected the hiring issues would ease in coming months.