The U.S. services economy continued to expand in June, according to data from the Institute for Supply Management (ISM) and S&P Global. While the two indices showed diverging trends in employment and growth rates, both remained above the 50-point threshold that separates economic expansion from contraction.
The services sector represents more than two-thirds of total U.S. economic output. The latest readings suggest the industry remains resilient despite persistent cost pressures and geopolitical instability, according to the reports released Monday.
S&P Global’s U.S. Services Purchasing Managers’ Index (PMI) rose 0.5 points to 51.2 in June, marking the strongest expansion in four months. Meanwhile, the ISM Services PMI declined to 54.0 from 54.5 in May, though it matched market expectations and extended its streak of expansion to six consecutive months.
Why are the June services economy signals mixed?
The divergence between the two reports stems from different readings of business activity and labor demand. S&P Global reported a modest increase in growth, while ISM saw a slight dip in its headline index. Chris Williamson, chief business economist at S&P Global, stated that while conditions improved in June, the overall pace of growth remains lackluster compared to the start of the year.
Williamson noted that business growth expectations for the coming year remain subdued because firms lack clarity regarding the economic and geopolitical outlook. He specifically pointed to the financial services sector, where business confidence remains muted due to expectations that the Federal Reserve may move interest rates higher.
On the ISM side, the new orders index fell to 55.1 from 57.3, and the business activity index dropped to 55.4 from 57.7. Survey analysts suggested this slowdown might be a normalization of purchasing patterns after companies placed large advance orders in response to the Middle East war. However, the backlog of orders index rose sharply to 54.9 from 51.3 in May, indicating that underlying demand persists.
How did the labor market perform in the services sector?
The two surveys provided contradictory views on hiring. The ISM services employment index jumped to 51.2 in June from 47.9 in May, marking its largest one-month increase since 2024 and returning to expansion territory. According to ISM, nine of the 18 tracked services industries reported higher employment levels, representing more than 58 percent of U.S. gross domestic product.
Steve Miller, chair of ISM’s Services Business Survey Committee, said this jump represents widespread confidence that hiring is warranted to support activity levels. The strongest hiring was noted in retail trade, construction, PS&T, accommodation and food services, finance and insurance, and wholesale trade.
S&P Global reported a different reality, finding that muted business conditions continued to discourage firms from expanding their workforces. Their data showed a net loss of jobs for the third time in four months.
What impact did the FIFA World Cup and inflation have?
Both indices credited the ongoing FIFA World Cup with boosting activity. S&P Global reported that demand linked to the tournament helped lift new business inflows at the fastest pace since February. ISM noted that the event likely provided support for its employment figures.
Cost pressures remain a significant factor for service providers, driven by tariffs and oil prices. While falling oil prices helped slow the pace of services inflation, input costs remain high. The ISM prices-paid index fell to 67.7 in June from 71.3 in May, but the index remains at a historically high level.
Based on the survey data, Chris Williamson estimated that the U.S. economy grew at an annualized rate of approximately 1.2 percent in the second quarter.
The next set of business activity data is typically released monthly by the Institute for Supply Management and S&P Global. Readers can monitor official releases from the Institute for Supply Management and S&P Global for updated PMI figures.
Do you think the resilience of the services sector will offset the volatility in other economic areas? Share your thoughts in the comments below.