Economic activity in the services sector continued to expand in June, say the nation’s purchasing and supply executives in the latest ISM Services PMI Report. The services PMI registered 54%, the 24th consecutive month in expansion territory.
The report was issued by Steve Miller, chair of the Institute for Supply Management (ISM) services business survey committee: “In June, the services PMI registered 54%, a decrease of 0.5 percentage point compared to May’s figure of 54.5%. The Business Activity Index remained in expansion territory in June, decreasing 2.3 percentage points to 55.4% from May’s reading of 57.7%. The New Orders Index registered 55.1%, 2.2 percentage points below May’s figure of 57.3%. The Employment Index expanded for the first time in four months with a reading of 51.2%, a 3.3-percentage point increase from the 47.9% recorded in May. All of the four subindexes that make up the composite PMI were above their 12-month moving averages.”
Miller said, “The Supplier Deliveries Index registered 54.4%, 0.8 percentage point lower than the 55.2% recorded in May. This is the 19th consecutive month that the index has been in expansion territory, indicating slower supplier delivery performance. (Supplier Deliveries is the only ISM PMI Reports index that is inversed; a reading of above 50% indicates slower deliveries, which is typical as the economy improves and customer demand increases.) The Prices Index decreased to 67.7% in June, 3.6 percentage points below May’s figure of 71.3% and its first time below 70% since February. The index has exceeded 60% for 19 straight months, maintaining its 12-month average of 68%. Diesel, gasoline, oil and related commodities were once again most frequently mentioned as up in price in June — and cited as down in price from other respondents. This is likely due to different contract terms for these commodities between companies.”
Miller continued, “The Inventories Index registered 51.2%, down 11.3 percentage points from May’s figure of 62.5%. The Inventory Sentiment Index expanded for the 38th consecutive month, registering 52.6%, down 2.6 percentage points from May’s figure of 55.2%. The Backlog of Orders Index remained in expansion territory for a fifth straight month, increasing 3.6 percentage points to 54.9% in June from May’s reading of 51.3%. The New Export Orders remained at 50% or above for the fifth month in a row, increasing 0.4 percentage point in June, to 50.4%. The Imports Index dropped into contraction territory at 49.4% in June, a decrease of 1.7 percentage points compared to its May reading of 51.1%, and its third consecutive lower reading since reaching 55.2% in March. Fourteen industries reported growth in June, three less than in May, and the number reporting contraction were four, an increase of three from May. The June Services PMI reading of 54% is 0.9 percentage point above the 12-month average of 53.1%. For the sixth straight month, that figure increased, with an uptick of 0.3 percentage point over May’s 12-month average of 52.8%.”
Miller added, “The Prices Index decreased to 67.7%, its lowest reading since February 2026 (63%). In this month’s report, some respondents reported reduced prices paid for gasoline and diesel, but this was not seen across the board. Petroleum-related products were mentioned again as a commodity up in price, something that we expect to see for several months as higher oil prices work their way through the supply chain, but they should ease off in the fall assuming recent progress in moving oil through the Strait of Hormuz continues. As of late June, West Texas Intermediate crude oil dropped below US$70 per barrel for the first time since February, a more than 30% drop from its high in recent months. The Supplier Deliveries Index continued to indicate slower performance; while easing for its second month in a row, it is still above its 12-month average. The more than 2-percentage point drops in both the Business Activity and New Orders indexes were partially offset by the 3.3 percentage point increase in the Employment Index. All four subindexes of the Services PMI are once again in expansion territory and above their 12-month averages. In a welcome sign of reduced growth rate of prices paid, June’s Prices Index reading of 67.7% is its lowest in four months and below its 12-month average. There were fewer commodities reported as up in price compared to previous months.”
Miller said, “Despite easing of the Supplier Deliveries Index, there was an increase in commodities listed as ‘in Short Supply,’ increasing from five in May to nine in June. All commodities in short supply in June are commodities necessary for data center construction, while the Utilities and Information industries all continued their more than six-month runs in expansion territory. Memory components, copper, aluminum, and heating, ventilation and air conditioning (HVAC) equipment continued multimonth runs of being listed as up in price.”
Miller concluded, “Respondents in June commented less frequently about pricing impacts on petroleum products, while tariff impacts continued to be a theme for increased pricing pressure. The Inventories Index dropped to its second-lowest level since October 2025, indicating that the buy-ahead phenomenon from earlier in the year may be over. The Imports Index dropped into contraction territory for the first time in five months, down from a spike to 55.2% in March, its highest level in over two years. The Backlog of Orders Index reached its second-highest level in almost four years. These readings, taken with respondent commentary, seem to indicate that supply chains are stabilizing amid sustained business activity, giving confidence to businesses that selective, yet modest, increased employment is warranted. World Cup-related hiring in the U.S. likely contributed to the increase to the Employment Index. Of the 18 services industries, nine of them — representing over 58% of U.S. gross domestic product (GDP) — reported higher employment levels in June. This represents widespread confidence that hiring is again warranted to support activity levels.”
The 14 services industries reporting growth in June — listed in order — are: arts, entertainment and recreation; mining; wholesale trade; transportation and warehousing; finance and insurance; accommodation and food services; retail trade; other services; professional, scientific and technical services; health care and social assistance; information; construction; utilities; and real estate, rental and leasing. The four industries reporting a contraction in the month of June are: agriculture, forestry, fishing and hunting; educational services; management of companies and support services; and public administration.
