Investing.com - U.S. private sector activity slowed in June, according to survey data released on Friday.
The preliminary reading of the Markit services purchasing managers’ index came in at 56.5 this month, down from 56.8 in May.
Economists had forecast a reading of 56.4.
The manufacturing PMI rose to 54.6 in June, compared to 56.4 a month earlier.
Analysts had expected a reading of 56.3.
The composite output index, which measures the combined output of both the manufacturing and service sectors, fell to 56.0 this month from 56.6 in May.
The consensus forecast was looking for a drop to 55.1.
A reading above 50.0 on the index indicates industry expansion, below indicates contraction.
Despite the drop in the composite index, IHS Markit said that “U.S. private sector firms experienced a strong end to the second quarter of 2018, driven by another robust contribution from service providers.”
“In contrast, manufacturing production growth slowed for the second month running, to its weakest since September 2017,” the research group indicated.
IHS Markit chief economist Chris Williamson highlighted that even with June’s slowdown, the second quarter was the best in three years.
According to his calculations, economic growth picked up from the 2.3% registered in the first quarter to an expansion well over 3%.
Williamson did note that price pressures remained elevated due to a mix of rising fuel prices and tariff-related price hikes, as well as supplier’s gaining pricing power as demand outstrips supply for many inputs.
This expert also commented that the risks are tilted to the downside for the coming months with business expectations for the year ahead at a five-month low, led by the weakest degree of optimism in manufacturing for nearly one-and-a-half years.
“For the first time this year, factory output is growing faster than order books, suggesting production maybe adjusted down in coming months,” this expert warned, adding that inflows of new business into the service sector had cooled to the weakest since January.
“Finally, although employment is still rising strongly, even here there are signs of weakness, with the latest rise in payrolls being the lowest for a year,” Williamson concluded.