Market Starts Optimistic After June's ISM Data Is Released! This is the reason

<p>&nbsp;The U.S. service sector grew faster than expected in June as new orders rose, but a measure of the price businesses paid for inputs fell to a more than three-year low, suggesting that closely watched services inflation will continue to moderate.</p><p><br /></p><p>The Institute for Supply Management (ISM) said on Thursday that its non-manufacturing PMI rose to 53.9 last month from 50.3 in May. A reading above 50 indicates growth in the service industry, which accounts for more than two-thirds of the economy. Economists polled by Reuters had forecast the non-manufacturing PMI rising to 51.0.</p><p><br /></p><p>The survey was among a number of indicators, including housing starts, NFP and orders for durable manufactured goods, that have suggested the economy continues to grow despite mounting risks posed by a large interest rate hike from the Federal Reserve.</p><p><br /></p><p>Higher borrowing costs have weighed on manufacturing, with ISM last week saying its manufacturing PMI remained stuck below the 50 threshold in June for the eighth month in a row.</p><p><br /></p><p><br /></p><p>The Fed has raised its policy rate by 500 basis points since March 2022, when it began its fastest monetary policy tightening campaign in more than 40 years.</p><p><br /></p><p>With the labor market still tight and inflation rising, the U.S. central bank is expected to continue raising rates this month after skipping June.</p><p><br /></p><p>A measure of new orders received by service businesses rose to 55.5 last month from 52.9 in May. There was a strong increase in exports. Despite rising demand, services inflation continued to moderate, which bodes well for the Fed's efforts to lower inflation to its 2% target.</p><p><br /></p><p>Some economists view the ISM measure of prices of services paid as a good predictor of personal consumption expenditure (PCE) inflation. The Fed tracks the PCE price index for monetary policy. The annual PCE price index excluding food and energy rose 4.6% in May after rising 4.7% in April.</p>