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U.S. Services Sector Slows in June Amid Cooling Demand and Labor Shortages — ISM

By Xavier Fontdegloria

 

Activity in the U.S. service sector continued to grow at a high pace in June, but the growth rate eased compared with the previous month as demand slowed and firms struggled to find candidates to fill open positions.

The ISM Services Report on Business PMI decreased to 60.1 in June from the 64.0 record-high registered in May, according to data from a survey compiled by the Institute for Supply Management released Tuesday.

Economists polled by The Wall Street Journal forecast the PMI to come in at 63.3.

"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," said Anthony Nieves, chair of the ISM Services Business Survey Committee.

The reopening of previously limited activity in hospitality, leisure and traveling is fueling a consumer-spending boom in the services sector. Many firms report they can't keep up with strong demand and struggle with both input and labor shortages.

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

The ISM services business activity index decreased to 60.4 from 66.2 the previous month, while the new orders index also declined to 62.1 from 63.9 in May.

The employment index fell to 49.3 from 55.3, entering contraction territory after five consecutive months of growth.

The supplier deliveries index dropped to 68.5 from 70.4 the previous month, but respondents' comments widely continued to report supply-chain outages and logistic delays.

The prices index eased somewhat to 79.5 from 80.6 the previous month, but remained at high levels.

"Severe supply chain disruptions and inflation are continuing in the marketplace, in all sectors," said one respondent from the arts, entertainment and recreation sector.

 

Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com

 

(END) Dow Jones Newswires

July 06, 2021 10:33 ET (14:33 GMT)

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