The US service sector expanded in June at the fastest pace in four months as business activity and orders quickened.

The Institute for Supply Management's overall gauge of services increased 3.6 points -- the most since the start of the year -- to 53.9 last month. Readings above 50 represent expansion, and the index exceeded all forecasts in a Bloomberg survey of an economists.

In a welcome sign on inflation, the group's measure of prices paid for materials and services dropped to the lowest level since March 2020.

The business activity index, which parallels the group's factory output gauge, jumped to a five-month high of 59.2, the Thursday data showed. The new-orders gauge, a proxy of future activity, also increased.

The figures show healthy and resilient demand for services as Americans favor spending on experiences while limiting discretionary purchases of merchandise. That dynamic helps explain a growing gulf between the two ISM surveys.

The manufacturing report, out earlier this week, showed factory activity contracted at the fastest pace in more than three years. The services index is now nearly 8 points higher than the manufacturing gauge, the widest margin since August 2015.

The ISM services employment index rose to a four-month high of 53.1, indicating service providers are expanding payrolls following a contraction in the prior month.

The government's monthly jobs report on Friday is projected to show a 225,000 gain in total US employment in June. While that would be the smallest increase since the end of 2020, it still represents a healthy pace of job growth.

The ISM measure of inventories at service providers grew at a more moderate pace following a surge in the prior month. A gauge of sentiment about inventory levels also eased but remained elevated.

Source : Bloomberg