Today’s release of the ISM Services report for the month of June came in stronger than expected at the headline level, but the internals of the report were somewhat weak.  While economists were expecting the headline number to come in at 58.3, the actual reading was 59.1, which was the highest monthly reading since February.  On a combined basis and accounting for each sector’s overall weight in the economy, our June composite ISM came in at 59.2.

While the headline reading for the June ISM Services report increased on a month over month basis, seven of the report’s ten subcomponents declined relative to May.  The last time that happened was in July 2010.  The only categories that increased were Business Activity, New Orders, and Export Orders.

The pickup in Business Activity was a particular standout as that component surged to 63.9, which is its highest reading since August 2005.

With the June Non Farm Payrolls report on deck for tomorrow, it is worth noting that the Employment component of this month’s ISM Services report fell from 54.1 down to 53.6.  While that’s a pretty modest decline, that component has been steadily declining for a number of months now.

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