US services firms grew in June at fastest pace in 7 months

WASHINGTON – U.S. services firms expanded last month at the fastest pace since November, good news for the U.S. economy.

The Institute for Supply Management said Wednesday that its non-manufacturing index rose to 56.5 in June from 52.9 in May. Any reading above 50 signals growth. Production, new orders and export orders grew faster in June. Employment grew last month after contracting in May.

Services have been a source of strength for the American economy. The ISM services index has shown growth for 77 straight months.

“The rebound in the ISM index reinforces our view that the US economy remains on a firm footing,” Andrew Hunter, an economist at Capital Economics, wrote in a research report.

He expects growth to accelerate to an annual pace of 3 per cent in the second quarter and to come it at “a solid” 2 per cent for the year.

Employees of private services companies hold 71 per cent of American non-farm jobs, and services firms account for 94 per cent of the 12.9 million jobs created since the Great Recession ended in June 2009.

The ISM is a trade group of purchasing managers. Its services survey covers businesses that employ the vast majority of workers, including retail, construction, health care and financial services companies.

The ISM reported last week that American manufacturing expanded last month for the fourth straight month. U.S. factories had been hurt last year by weak demand overseas and a strong dollar that makes U.S. goods more expensive in foreign markets.

The American economy got off to a slow start this year, growing at a lacklustre 1.1 per cent annual pace from January through March. Economists expect the economy to grow at least twice as fast from April through June, lifted by a pickup in consumer spending.