U.S. Services Sector Extends Growth Streak as Price Pressures Ease — Evening Brief – 07.06.26

The U.S. services sector continued to expand in June, supported by improving employment conditions and easing price pressures, even as overall growth moderated from the previous month. Separate surveys from the Institute for Supply Management and S&P Global pointed to a resilient but slower-growing economy, with businesses continuing to navigate tariff-related cost pressures and lingering geopolitical uncertainty.

The ISM Services Purchasing Managers Index registered 54.0 in June, essentially in line with economists’ expectations of 54.1 and down slightly from 54.5 in May. Readings above 50 indicate expansion, marking the sector’s 24th consecutive month of growth. All four major ISM subindexes remained in expansion territory and above their respective 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,” said Steve Miller, chair of the ISM Services Business Survey Committee. He noted that petroleum-related pricing pressures eased during the month, although respondents continued to cite tariffs as a source of cost inflation.

The ISM Prices Index declined to 67.7 from 71.3 in May, while the Employment Index returned to expansion at 51.2 from 47.9. New Orders moderated to 55.1 from 57.3, and Business Activity eased to 55.4 from 57.7.

S&P Global’s Composite PMI was revised to 51.9 from an initial reading of 52.2, up from 51.5 in May. The Services PMI was revised to 51.2 from 51.3.

“A slight acceleration of business growth in the services economy takes the expansion to the strongest since the outbreak of the war in the Middle East,” said Chris Williamson, chief business economist at S&P Global Market Intelligence. However, he noted that overall activity remains subdued and is consistent with second-quarter economic growth of approximately 1.2% on an annualized basis.