Ahead of the Bell: US Services Index

US service sector likely expanded at slightly slower pace in June

Associated Press
US services sector expands at slower pace in June
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This Friday, June 6, 2014 photo shows David Barry, left, and Anthony Scharf drying a car at a car wash in Woodmere Village, Ohio. The Institute for Supply Management, a trade group of purchasing managers, issues its index of non-manufacturing activity for June on Thursday, July 3, 2014. (AP Photo/Tony Dejak)

WASHINGTON (AP) -- The Institute for Supply Management reports on growth at U.S. service firms in June. The ISM will release its services index at 10 a.m. Eastern time on Thursday.

STEADY GROWTH: Economists forecast that the index dipped to 56 in June from 56.3 in May. But anything above 50 indicates the services sector is expanding. The ISM is a trade group of purchasing managers.

The services survey covers businesses that employ 90 percent of the workforce, including retail, construction, health care and financial services firms.

BUILDING MOMENTUM: Last month's reading was the highest since August 2013 and suggested that the economy is picking up momentum after getting off to a miserable start this year. The services index bounced back after sliding to the lowest level in four years in February in the midst of a bitter winter that caused restaurants and stores to close across the country.

The economy shrank at an annual pace 2.9 percent from January through March, but most economists blame the slump on temporary factors — the bad weather and a sharp drop in business inventories. The economy has shown signs of strength as the weather warmed. They expect economic growth to rebound to an annual pace of 3 percent or more for the rest of the year, boosted by rising consumer demand and a rebound in U.S. export sales.

On Wednesday, a survey by payroll processor ADP showed that U.S. businesses added 281,000 jobs last month, most since November 2012. The ADP figures often vary from the government's employment report, which is due Thursday. Economists expect the official report to show that employers added more than 200,000 jobs in June for the fifth straight month, longest such stretch since the dotcom boom of 1999-2000.

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