The Institute for Supply Management (ISM) reported on Monday that its non-manufacturing index (NMI) came in at 57.1 in June, which was 11.7 percentage points higher than the May reading of 45.4 percent. The reading was the highest since February and represented growth in the non-manufacturing sector after a two-month period of contraction preceded by 122 straight months of expansion. It was also the largest single-month percentage-point increase in the NMI since its debut in 1997.

Economists forecast the index to increase only to 49.5 last month. A reading above 50 signals expansion, while a reading below 50 indicates contraction.

Of the 18 manufacturing industries, 14 reported increases last month, the ISM said, adding that respondents remained concerned about the coronavirus and the more recent civil unrest, but they were cautiously optimistic about business conditions and the economy as businesses were beginning to reopen.

According to the report, the ISM’s non-manufacturing Business Activity measure surged 25 percentage points to 66 percent from May’s figure of 41 percent. Meanwhile, the New Orders gauge came in at 61.6 percent, 9.7 percentage points higher than the reading of 41.9 percent in May. The Employment Index increased by 11.3 percentage points to 43.1 percent from the May reading of 31.8 percent. The Prices Index of 62.4 percent is 6.8 percentage points higher than the May reading of 55.6 percent, indicating that prices increased in June. Meanwhile, the Supplier Deliveries Index registered at 57.5 percent, down 9.5 percentage points from May’s reading of 67 percent.

Commenting on the data, the Chair of the ISM Non-Manufacturing Business Survey Committee, Anthony Nieves, noted, "The past relationship between the NMI and the overall economy indicates that the NMI for June (57.1 percent) corresponds to a 2.9-percent increase in real gross domestic product (GDP) on an annualized basis.”