Activity in Services Sector Shows Record Rebound in June

Washington – Activity in the U.S. services sector rebounded strongly last month, but those gains are now being threatened by the resurgence of coronavirus cases in many parts of the country.

The Institute for Supply Management said Monday that its service sector index rose to 57.1 in June, up from a reading of 45.4 in May. Any reading above 50 means that the service sector, where the majority of Americans work, is expanding.

The June advance was 11.5-percentage points higher than the May reading. It was the largest percentage point gain in the history of the services index which goes back to 1997. The April decline in the index had been the biggest point-drop on record. Before the April and May setbacks, the index had been in expansion territory for 122 months.

Last week, ISM reported that its manufacturing index rebounded to a reading of 52.6 after registering big declines in the two previous months.

The reading for services index was better-than-expected but did still left concerns about what rising virus cases could do to efforts by restaurants, bars and other service businesses to stay open.

“We believe the recovery will progress at a slower pace compared to this initial, snap-back phase,” said Gregory Daco, chief economist at Oxford Economics. “The concerning trajectory of the virus in recent weeks will be the key impediment constraining the recovery as many states have now paused or rolled back their reopening plans due to a spike in cases.”

Daco said it will be difficult for the recovery to gain momentum until businesses and consumers are confident that the worst of the pandemic is over.