US services sector, factory data point to solid economic growth

Tags: News
US services sector activity hit an 8-1/2-year high last month and factory orders surged in June, bolstering expectations of solid economic growth in the third quarter.

The Institute for Supply Management said on Tuesday its services index rose to 58.7, the highest level since December 2005, from 56.0 in June, with new orders reaching their highest level since August 2005.

A reading above 50 indicates expansion in the sector.

In a separate report, the Commerce Department said orders for manufactured goods increased 1.1% after a 0.6% decline in May. Economists had forecast new orders received by factories rising only 0.6%.

US stocks held losses after the unexpectedly better ISM and factory orders data, while the US dollar extended gains against a basket of currencies. Yields on US 10-year and 30-year Treasuries touched session highs after the data.

Manufacturing is expanding strongly, helping to keep the economy on solid ground. A survey last Friday showed new orders at the nation's factories surged in July.

Automobile production is also accelerating. But businesses amassed huge piles of stocks in the second quarter, which they will probably need to work through before placing more orders.

That could take some edge off factory activity and overall economic growth. The economy grew at a 4.0% annual pace in the April-June period, and growth estimates for the third quarter are currently around a 3% rate.

Orders excluding the volatile transportation category jumped 1.1% in June, the largest increase since July of last year, as bookings for primary metals, machinery and electrical equipment, appliances and components rose. Orders for computers and electronic products also increased.

Unfilled orders at factories rose 1.0%. Order backlogs have increased in 14 of the last 15 months.

The Commerce Department also said orders for durable goods, which are manufactured products expected to last three years and more, rose a sturdy 1.7% in June instead of the 0.7% rise reported last month.

Durable goods orders excluding transportation surged 1.9% instead of the previously reported 0.8% advance.

Orders for non-defense capital goods excluding aircraft - seen as a measure of business confidence and spending plans - increased 3.3%. The so-called core capital goods data was previously reported to have increased 1.4%.

The factory orders report showed inventories rose 0.3% in June, slowing from May's 0.8% gain. Shipments rose 0.5% after slipping 0.1% in May. The inventories-to-shipments ratio was unchanged at 1.31.

Post new comment

E-mail ID will not be published
CAPTCHA
This question is for testing whether you are a human visitor and to prevent automated spam submissions.

EDITORIAL OF THE DAY

  • The current value of the rupee does not merit market intervention

    The rupee, losing 40 paise per month against the dollar since May, is expected to remain under pressure till the calendar runs out on December 31, bef

FC NEWSLETTER

Stay informed on our latest news!

INTERVIEWS

GV Nageswara Rao

MD & CEO, IDBI Federal Life

Timothy Moe

Goldman Sachs

Chander Mohan Sethi

CMD, Reckitt Benckiser India

COLUMNIST

Tushar Gandhi

Sustainable model for rural sanitation

Prime minister Narendra Modi has promised to build a toilet ...

Zehra Naqvi

How smells evoke strong memories

Remember that time when a passing fragrance transported you to ...

Dharmendra Khandal

Indian zoos need a fresh approach

Recently, when a man jumped in a tiger trench of ...

INTERVIEWS

William D. Green

Chairman & CEO, Accenture