US services sector slows in June on falling orders

WASHINGTON (Reuters) – The ISM non-manufacturing index, a gauge of U.S. services sector activity, fell to a four-year low in June on a sharp drop in orders, suggesting a possible loss of economic momentum at the end of the second quarter.

According to the Institute for Supply Management, the non-manufacturing purchasing managers’ index (PMI) fell to 48.8 last month, the lowest since May 2020, from 53.8 in May. It was the second time this year that the PMI has fallen below 50, a threshold that indicates a contraction in the services sector.

Economists polled by Reuters had forecast a reading of 52.5. The PMI fell below the 49 mark, which, according to the ISM, generally indicates an expansion in the overall economy over time. The gauge of economic activity fell to 49.6, the first contraction since May 2020, from 61.2 in May.

The new orders gauge fell to 47.3, the lowest since December 2022, from 54.1 in May. And hiring in services continued to slow. That would point to lower job growth in the coming months, even if surveys have not proven to be reliable indicators of job gains.

(Translated by Chiara Scarsiglia, edited by Sabina Sozzi)