US PMI Improves as Middle East Tensions Ease and Energy Costs Fall

US business activity accelerated in June, with the Flash Composite PMI Output Index rising from 51.5 to 52.2, its highest level in five months. The improvement was driven largely by manufacturing, where the Manufacturing PMI increased from 55.1 to 55.7, a 49-month high, while the Manufacturing Output Index climbed from 56.6 to 57.7, the strongest reading in nearly five years. Services activity also improved modestly, with the Services PMI Business Activity Index rising from 50.7 to 51.3, a four-month high.

According to S&P Global’s Chris Williamson, improved sentiment following progress toward peace in the Middle East helped support business confidence. However, he cautioned that overall growth remains relatively subdued compared with the pace seen before the conflict. The survey is consistent with an economy expanding at little more than a 1% annualized rate in the second quarter. Services activity continued to be restrained by consumer resistance to higher prices and weak confidence, while manufacturing growth remained supported by inventory building as firms sought protection against supply disruptions. Supply delays became more widespread during June, suggesting concerns about supply chains have not fully disappeared.

The labor market remained the weakest part of the report. Williamson noted that employment fell again, with manufacturing job losses running at their fastest pace since 2009, excluding the pandemic period. Businesses appear increasingly concerned about the durability of recent demand growth and the impact of rising raw material costs. Nevertheless, there was some relief on the inflation front. While input cost pressures remained elevated by historical standards, June data showed signs of cooling, helped in part by lower energy prices toward the end of the survey period.

Full US PMI flash release here.