U.S. Firms Growth Expected To Continue Following ISM Data

Since last month U.S. service sector surveys have improved which suggests that the pace of growth in services’ activity is speeding up.

The ISM non-manufacturing index is due to be released in the coming days and is expected to climb in July from 56% to 56.5%. The index is based on a national survey of around 370 purchasing executives in various industries and is published by the Institute for Supply Management.

However, the slight growth isn’t particularly surprising as the index has stayed between 52% and 57% in every month except one since March 2010. If the number is above 50% then it means that a majority of companies are experiencing faster growth and numbers above 55% are an indication of particularly strong growth.

As the headline number of the ISM has stayed very stable for a number of years, investors should be paying more attention to the part of the report that gauges hiring intentions and employment levels. In June the employment index stood at 54.4, the highest level since January. It is thought that it could go higher still considering the upturn in U.S. hiring since the spring. If it does it means that companies are intending to keep hiring at a rapid pace.