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ISM: US nonmanufacturing growth rises in June, but tariff concerns remain

The U.S. nonmanufacturing sector expanded at a faster pace in June compared to the previous month, but businesses remain worried about the impact of trade tariffs, the Institute for Supply Management, or ISM, reported.

The ISM's nonmanufacturing index went up to 59.1% in June from 58.6% in May, with 17 industries reporting growth.

The nonmanufacturing business activity index rose to 63.9% from 61.3%, and the new orders index increased to 63.2% from 60.5%. The employment index edged down to 53.6% from 54.1%.

While respondents remain optimistic about business conditions and the overall economy, "there is a continuing concern relating to tariffs, capacity constraints and delivery," said Anthony Nieves, chair of the ISM nonmanufacturing business survey committee.

In June, the prices index fell to 60.7% from 64.3% in May, indicating that prices increased for the 28th consecutive month, ISM said.

Meanwhile, another gauge of the services sector's health showed slightly slower growth in June. The seasonally adjusted final IHS Markit U.S. services business activity index came in at 56.5, unchanged from the initial reading and down from 56.8 in May.

Output grew at the second-fastest pace since April 2015, due to greater client demand and the acquisition of new customers, according to IHS Markit. New business received also increased sharply, although the pace of growth softened to a three-month low.

The rate of input price inflation in June was level with May and tied for the fastest since September 2013, due to supplier shortages and recently introduced tariffs, accompanied by higher fuel prices.

The seasonally adjusted IHS Markit U.S. composite PMI output index for June was slightly revised to a final reading of 56.2 from 56.0, down from 56.6 in May but marking the second-fastest expansion of the U.S. private sector since April 2015.

"On the downside, price pressures remained elevated, and are likely to feed through to higher consumer price inflation in coming months," said IHS Markit Chief Business Economist Chris Williamson.

The composite PMI output index includes data from service and manufacturing sectors.

A reading above 50 in the surveys by both ISM and IHS Markit indicates expansion.