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U.S. service sector rebounds strongly in June

·2 min read
FILE PHOTO: Restaurants reopen in Michigan
FILE PHOTO: Restaurants reopen in Michigan

WASHINGTON (Reuters) - U.S. services industry activity rebounded sharply in June, almost returning to its pre-COVID-19 pandemic levels, but a resurgence in coronavirus cases that has forced some restaurants and bars to close again threatens the emerging recovery.

The Institute for Supply Management (ISM) said on Monday its non-manufacturing activity index jumped to a reading of 57.1 last month, the highest since February, from 45.4 in May. It has bounced back from a reading of 41.8 in April, which was the lowest since March 2009.

A reading above 50 indicates growth in the services sector, which accounts for more than two-thirds of U.S. economic activity. Economists polled by Reuters had forecast the index increasing to a reading of 48.9 in June.

The report followed the ISM's manufacturing survey last week showing factory activity rebounding to a 14-month high in June. The upbeat surveys, however, have been overshadowed by raging COVID-19 cases in large parts of the country, including the densely populated California, Florida and Texas.

The flare-up in cases that started in late June has prompted several states to scale back or pause reopenings, hitting restaurants and bars hard.

The ISM survey's measure of new orders for the services industry increased to a reading of 61.6 in June from 41.9 in the prior month. There was an increase in export orders, and order backlogs swelled.

The survey's index of services industry employment rose to a reading of 43.1 last month from 31.8 in May.

Though this measure has pulled off 30.0 in April, a level last seen in 1997, it was at odds with a report last Friday showing nonfarm payrolls surging by a record 4.8 million jobs in June. The services sector accounted for 4.263 million of the jobs.

(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama)