#United States #Economic Growth #Tempe #ISM Report #Services PMI

U.S. Services Sector Growth in June 2025

The Institute for Supply Management® (ISM) released the Services PMI® (Purchasing Managers' Index) for June 2025, revealing that economic activity in the services sector expanded, marking a significant rebound from a month of contraction. The Services PMI® scored 50.8%, which is above the crucial 50% threshold that indicates expansion in the economy. This shift comes after the PMI dropped to 49.9% in May, suggesting that activity is on the rise once again.

According to Steve Miller, Chair of the ISM Services Business Survey Committee, the Business Activity Index climbed to 54.2%, showcasing a recovery from the previous May figure of 50%. This is a reassuring sign as the index has remained positive, with significant growth seen over the last three months, placing the activities back in expansion territory. The New Orders Index also reported an increase, registering 51.3% in June, compared to May's 46.4%. This upward trend in new orders indicates that businesses are seeing increasing demand, providing a much-needed boost to the services sector.

Despite the overall positive trends, the Employment Index fell to 47.2%, reflecting ongoing challenges in hiring and managing workforce levels. Respondents noted that while staffing may be stable for now, the looming uncertainty surrounding economic conditions has made hiring decisions cautious. This sentiment was echoed by various companies experiencing stagnation in sales activity, particularly in the real estate and construction sectors. Additionally, some respondents mentioned the impacts of tariffs and the uncertain geopolitical landscape, which has led to concerns about rising costs and delayed procurement processes.

Interestingly, the Supplier Deliveries Index reported at 50.3%, indicating that delivery performance has slowed. This index shows that as demand rises, suppliers are struggling to keep up with the pace, which aligns with the natural progression of an expanding economy. In terms of prices, the Prices Index remained elevated at 67.5%, although this was a slight decrease from May's reading. With the index consistently above 60% for several months, it reflects ongoing inflationary pressures on the services sector, imposing additional costs on businesses.

The report illustrated that ten out of eighteen service industries reported growth in June, including notable sectors such as Transportation & Warehousing, Utilities, and Arts & Entertainment, while industries like Agriculture, Construction, and Professional Services faced contraction. This diverse performance across industries highlights varying recovery trajectories as businesses adapt to the current economic climate.

Many industry leaders are reporting worries regarding affordability issues for consumers due to rising mortgage rates and property values. Such factors have curtailed spending in several markets, emphasizing a cautious offering from businesses looking to bolster growth amid lingering uncertainties in the economy.

Despite the hurdles faced, only six industries reported a decline in activity, and there is hope for more robust recovery in the coming months.