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Declining Hospital Economic Activity in June 2025

In a concerning shift for the healthcare sector, the Hospital PMI® registered a notable decline to 49% in June 2025, marking a significant decrease from May's reading of 52%. This contraction comes after an impressive 21 months of consecutive growth. The recent data was shared by Nancy LeMaster, MBA, Chair of the Institute for Supply Management (ISM) Hospital Business Survey Committee, who indicated that this marks only the fifth time in over seven years that the hospital PMI has dipped below the critical threshold of 50%.

The report highlighted that the Business Activity Index remained despite falling into contraction territory, demonstrating a complex landscape for hospital supply executives. The New Orders Index has improved, returning to growth from a stagnant reading in May which is a positive sign, while the Employment Index saw a troubling return to contraction, signaling the lowest employment levels since January 2022. Additionally, the Supplier Deliveries Index held steady in June, suggesting that delivery performance remained unchanged after two months of improvement.

LeMaster noted in her report that concerns regarding the effects of tariffs and an ever-evolving geopolitical landscape were prevalent among panelists. Many indicated that hospitals and healthcare systems were beginning to feel the adjoined financial pressures from increased tariff-related surcharges. The most notable change reported this month was an 8-percentage point drop in the Employment Index, emphasizing the challenges hospitals face due to budget constraints and diminishing federal funding.

Despite this downswing, there remains a glimmer of hope. The Business Activity Index only fell by 3.5 percentage points from the previous month, showcasing that many facilities continue to experience strong or typical seasonal volumes. Inventory growth, albeit slowed, is still prevalent as organizations work to mitigate the impacts of tariffs and potential shortages. On a positive note, the Supplier Deliveries Index indicates improvements in the procurement process as product shortages remain minimal.

Key Takeaways from the June 2025 Report

1. Hospital PMI: The Hospital PMI dropped to 49% in June, indicating contraction for the first time in over 21 months.
2. Business Activity Index: Remains strong, showing positive seasonal volumes despite a slight decrease.
3. New Orders Index: Returned to expansion territory indicating potential future growth.
4. Employment Challenges: A significant drop in employment levels was noted, attributed to pressures on margins and a lack of federal funding rather than decreased patient volumes.
5. Tariff Pressures: Hospital executives are raising concerns regarding tariffs and cost increases affecting procurement.
6. Supplier Deliveries: Remained unchanged, suggesting stability in the logistics aspect of hospital operations.
7. Future Outlook: The upcoming months will be critical in understanding how these trends develop and whether the hospital PMI can return to growth.

The Hospital ISM® Report serves as an essential tool for understanding the trends that shape the healthcare supply chain and plays a pivotal role in decision-making for professionals across the sector. For more detailed information, these reports are released monthly and can be accessed through the ISM's official channels, providing an ongoing gauge of economic activity in this vital area of the economy.

The next Hospital ISM® Report featuring data for July 2025 is scheduled for release on August 7, 2025, offering further insights into this evolving landscape. As the healthcare sector navigates these challenges, the importance of effective supply chain management and strategic planning remains crucial for navigating the uncertainties ahead.