US ISM Services PMI edged down from 54.5 to 54.0 in June, missing expectations of 54.2 but remaining comfortably above the 50 threshold that separates expansion from contraction. The report pointed to continued growth in the services sector, although activity and demand moderated slightly from the previous month.
Business Activity/Production eased from 57.7 to 55.4, while New Orders slipped from 57.3 to 55.1, suggesting growth remained solid but lost some momentum. A notable bright spot came from the labor market, with the Employment Index rising sharply from 47.9 to 51.2, returning to expansion for the first time in four months. ISM noted that a Services PMI reading of 54.0 is historically consistent with annualized real GDP growth of about 1.9%.
Inflation pressures also showed signs of easing. The Prices Index fell from 71.3 to 67.7, dropping below 70 for the first time since February, although it has remained above 60 for 19 consecutive months. ISM said some respondents reported lower gasoline and diesel costs, but petroleum-related products continued to face price increases as earlier oil shocks worked through supply chains. Those pressures are expected to ease later this year if recent progress in restoring oil flows through the Strait of Hormuz continues.
| Indicator | Previous | Latest | Expectation |
|---|---|---|---|
| ISM Services PMI | 54.5 | 54.0 | 54.2 |
Key Components
| Component | Previous | Latest | Comments |
|---|---|---|---|
| Business Activity / Production | 57.7 | 55.4 | Growth moderated but remained above its 12-month average of 55.1 |
| New Orders | 57.3 | 55.1 | Demand eased but continued to expand |
| Employment | 47.9 | 51.2 | Returned to expansion for the first time in four months |
| Prices | 71.3 | 67.7 | Lowest since February; still above 60 for the 19th consecutive month |
