MNI INTERVIEW: ISM: US Services to Fall Again on New Closures

By Brooke Migdon

     WASHINGTON (MNI) - The U.S. service industry's June rebound won't last with

a second round of business shutdowns in some of the most populous states

underway, the chair of the ISM's survey said Monday.

     Covid-19 spikes in Texas, Florida, Arizona and California that account for

30% of the population will almost certainly hamper activity in July, Anthony

Nieves said. More states in early July postponed their re-opening plans, citing

concerns over rising infection rates.

     "We may see some ramifications in July," of the shutdowns, Nieves said in

an interview with MNI.

     Increased activity in accommodation and food services helped drive

non-manufacturing strength in June, Nieves said. That's a worrying sign when

nearly all bars and restaurants in recently re-opened states were ordered to

close or further reduce seating capacity.

     Nieves expects most of these businesses to re-open for a second time in

mid-July which will hopefully offset the damage done in the last week of June

and keep monthly business activity somewhat high. 

     --PARTIAL JOB REBOUND

     "Companies want to re-open," he said. "But it's going to be a matter of the

contagion itself."

     Business closures in the last week of June had little effect on the ISM's

non-manufacturing gauge because most respondents had already submitted their

survey responses by the time governors ordered businesses to close, he said.

     The ISM Non-Manufacturing Index increased 11.7 points to 57.1 in June, the

largest single-month change on record and indicating the first expansion since

the Covid-19 pandemic was declared in March. The business activity sub-index

increased 25 points to 66, and the employment index rose to 43.1, an increase of

11.3 points from May, though still signaling contraction.

     The employment index will remain muted even as the headline number

increases because social distancing guidelines mean businesses are able to

re-open in only a limited fashion.

     "Even the companies that did open up came back at 50%-75% capacity," he

said. "Staffing levels are down because volume is down -- it's a direct

correlation."

--MNI Washington Bureau; +1 202 371 2121; email: brooke.migdon@marketnews.com

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