4 Mutual Fund To Buy As US Service Sector Scales Up In May

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The U.S. non-manufacturing or service sector expanded at full speed in May as rapid vaccination efforts and decline in cases led to a relaxation of restrictions, following into an economic rebound. Per the Institute for Supply Management (ISM) report released on Jun 3, the index of non-manufacturing activities hit another all-time high last month rising to 64%, a 1.3 percentage point rise from April’s figure.

A reading above 50 indicates expansion in the sector and anything above 60% is expectational. In the survey, respondents stated that “stimulus money, increased vaccinations, increased dining capacity and pent-up demand are driving a fast recovery for dine-in restaurants.”

According to the group, all the 18 major services industries reported growth in May and the composite index witnessed 12 consecutive month growth, after contracting significantly last April and May. Americans engaged in activities that were restricted during the pandemic and that helped the sector outperform despite widespread labor and supply shortages hindering businesses from recovering and growing faster.

The sub-indexes like supplier deliveries index grew to 70.4% in May, surpassing 66.1% in the prior month, while the price index rose to 80.6% from 76.8% in April. The price gauge touched the highest level in 13 years as the price for labor and materials rose due to supply shortage.

However, the biggest bottleneck obstructing faster growth of the service sector is the labor shortage. Per the respondents’ comments, labor is in short supply even though the unemployment rate remains high. Some employers have reported that they are offering cash incentives to those showing up for an interview.

On the brighter side, businesses are hopeful that the rapid economic rebound will bring back things to normal and gradually curb shortages, boosting the space higher. In such a scenario, investing in mutual funds having significant exposure to services-related companies may prove prudent.

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