U.S. Business Activity Hits Five-Month High as Manufacturing Powers Ahead — Evening Brief – 06.23.26
U.S. business activity accelerated in June, driven by the strongest manufacturing output growth in nearly four years as easing geopolitical tensions helped lift sentiment, according to data released Tuesday by S&P Global.
The U.S. Composite PMI Output Index rose to 52.2 in June from 51.5 in May, topping the consensus forecast of 51.2 and reaching its highest level in five months. Readings above 50 indicate expansion.
Manufacturing was the standout performer. The U.S. Manufacturing PMI climbed to 55.7 from 55.1 in May and exceeded economists’ expectations of 54.7. Output expanded at the fastest pace since July 2021 as new orders increased at their strongest rate in more than four years.
“Brighter news out of the Middle East has helped restore some confidence among U.S. businesses in June, though the overall rate of economic growth signaled by the flash PMI survey remains relatively sluggish compared to that seen earlier in the year in the lead up to the conflict,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.
The service sector improved modestly but continued to lag manufacturing. The Services PMI Business Activity Index rose to 51.3 from 50.7 in May, slightly above the 51.0 consensus estimate.
Service providers cited elevated prices, higher interest rates and subdued confidence among consumers and businesses as constraints on growth, though expectations for activity over the next year improved to their highest level since February.
Optimism was partly driven by hopes that tensions in the Middle East would continue to ease, reducing supply disruptions and inflationary pressures.
Separately, regional manufacturing activity slowed. The Richmond Fed Manufacturing Index fell to 4 in June from 13 in May, missing expectations for a reading of 8.
All three major components weakened. The shipments index dropped to 3 from 16, new orders declined to 9 from 17, and employment slipped into negative territory at -1.
Price pressures remained elevated, however. The Richmond Fed’s prices paid index rose to 6.99 from 5.96 in May, while prices received increased to 4.57 from 4.21, suggesting manufacturers continue to face cost pressures even as growth moderates.