US services activity continued to expand in June, though at a somewhat more moderate pace. As the United States and Iran entered ceasefire negotiations, price pressures eased and employment rebounded into expansion territory.
The Institute for Supply Management (ISM) said Friday that its services purchasing managers' index (PMI) registered 54.0 in June. That was down 0.5 point from 54.5 in May. The ISM said the overall economy had grown for 73 consecutive months and services activity for 24 consecutive months through June. A PMI below 50 indicates contraction in economic activity, while a reading above 50 indicates expansion.
Among the sub-indexes, the employment index rose to 51.2, up 3.3 points from 47.9 in May, returning to expansion territory for the first time in four months. The prices index, by contrast, fell to 67.7 from 71.3 in May. As gasoline and diesel prices stabilized, the index dropped below the 70 level for the first time since February this year.
The business activity index came in at 55.4, down 2.3 points from 57.7 in May. The new orders index fell to 55.1, down 2.2 points from 57.3 in May. The inventories index plunged to 51.2 from 62.5 in May.
Steve Miller, chair of the ISM Services Business Survey Committee, said, "The impact of tariffs continued to be a prominent theme adding upward pressure on prices." He noted that "the raw materials reported in short supply in June were all items essential to data center construction."
The final June services PMI from S&P Global, another compiler, registered 51.2. That was slightly below the market forecast of 51.4. Chris Williamson, chief business economist at S&P Global Market Intelligence, said, "The expansion among service-sector firms was the strongest since the outbreak of the war in the Middle East, but activity remains lackluster compared with earlier this year."
