U.S. services sector expands slower in June amid supply bottlenecks, elevated inflation

WASHINGTON, July 6 (Xinhua) -- The U.S. services sector posted a slower growth in June than the previous month, amid continued supply bottlenecks and elevated inflation, the Institute for Supply Management (ISM) reported Wednesday.

The Services Purchasing Managers' Index (PMI) registered 55.3 percent, 0.6 percentage point lower than May's reading, according to the latest Services ISM Report on Business. Any reading above 50 percent indicates the services sector is generally expanding.

"The message from the June ISM report is that service activity is cooling rather than buckling," Tim Quinlan and Shannon Seery, economists at Wells Fargo Securities, said in an analysis.

"Service-providers continue to contend with an array of supply issues, which are limiting capacity and keeping the heat turned up on prices." Quinlan and Seery noted.

New Orders Index registered 55.6 percent, down 2 percentage points from the May reading, the report showed.

The Supplier Deliveries Index registered 61.9 percent, 0.6 percentage point higher than that reported in May, indicating slower deliveries.

The Inventories Index contracted for the first time since January, with the reading of 47.5 percent, down 3.5 percentage points from May's figure. The Inventory Sentiment Index (46.2 percent, up 1.7 percentage points from May's reading) contracted in June for the fourth consecutive month, indicating that inventories were in "too low" territory and "insufficient for current business requirements."

The Prices Index dropped for the second consecutive month in June, decreasing 2 percentage points to 80.1 percent.

"Inflation is definitely taking a bite from our sales, and mall traffic is far below the norm, potentially due to inflation, a need for more disposable income on essentials and less willingness to drive to malls," said a business executive from retail trade, adding that e-commerce sales will be going up again.

A business executive from utilities industry, meanwhile, noted that despite higher inflation and energy costs, "demand and business activity continue to be at record highs, with little sign of a slowdown."

"(Interest) rate increases have slowed sales but have not helped with supply challenges yet," according to an executive from construction industry.