Services sector economic activity in the United States grew during June after a month of contraction, with retail among the services industries that expanded, according to purchasing and supply executives responding to the latest Services Report On Business from the Institute for Supply Management (ISM).
Meanwhile, economic activity in the manufacturing sector shrunk in June for the fourth consecutive month following a two-month expansion that had been preceded by 26 straight months of contraction, according to ISM.
The Services Purchasing Managers Index indicated expansion with a reading 50.8%, above the May figure of 49.9% number as well as the 50% breakeven point between growth and decline. In June, the service sector expanded for the 11th time in the past 12 months.
In detailing results, Steve Miller, chair of the ISM Services Business Survey Committee, stated, “The Business Activity Index returned to expansion territory in June, registering 54.2%, 4.2 percentage points higher than the ‘unchanged’ reading of 50% recorded in May. This index has not been in contraction territory since May 2020. The New Orders Index returned to expansion territory in June, recording a reading of 51.3%, an increase of 4.9 percentage points from the May figure of 46.4%. The Employment Index returned to contraction territory for the third time in the last four months. The reading of 47.2% is 3.5 percentage points lower than the 50.7% recorded in May. The Supplier Deliveries Index registered 50.3%, 2.2 percentage points lower than the 52.5% recorded in May. This is the seventh consecutive month that the index has been in expansion territory, indicating slower supplier delivery performance.”
Supplier Deliveries is the only Report On Business index that is inversed, as a reading of above 50% indicates slower deliveries, which is typical as the economy improves and customer demand increases.
“The Prices Index registered 67.5% in June, a 1.2-percentage point decrease from May’s reading of 68.7%,” Miller noted. “The index has exceeded 60% for seven straight months, with the May and June readings the highest since November 2022, 69.4%. The Inventories Index landed in expansion territory in June for the fourth time in 2025, registering 52.7%, an increase of three percentage points from May’s figure of 49.7%. The Inventory Sentiment Index expanded for the 26th consecutive month, registering 57.1%, down 5.8 percentage points from May’s figure of 62.9%. The Backlog of Orders Index continued its decline, registering 42.4% in June, a one percentage point decrease from the May figure of 43.4%, contracting for the 10th time in the last 11 months and posting its lowest reading since August 2023, 41.8%.
Miller further observed, “June’s PMI level is a welcome return to expansion, although slow growth and economic uncertainty were frequently referenced by respondents. This month’s reading is equal to the average reading of 50.8% over the prior three months, indicating both stability and slight expansion in that time period. Both the Business Activity and New Orders indexes returned to expansion territory, although the Backlog of Orders Index contracted at a faster rate compared to May. Price increases impacting costs of operations were mentioned more frequently this month. Middle East tensions were a new subject of comments in June, but there was no indication of related supply chain disruptions. The most common topic among survey panelists continued to be concerns about impacts related to tariffs.”
Services sector industries reporting growth in June were Other Services; Transportation and Warehousing; Utilities; Arts, Entertainment and Recreation; Management of Companies and Support Services; Wholesale Trade; Public Administration; Retail Trade; Information; and Real Estate, Rental and Leasing. The industries reporting a June contraction were Agriculture, Forestry, Fishing and Hunting; Construction; Mining; Health Care and Social Assistance; Professional, Scientific and Technical Services, and Educational Services.
The June Manufacturing PMI came in at 49% in June, a 0.5-percentage point increase compared with May. Still the overall economy continued in expansion for the 62nd month after one month of contraction in April 2020, ISM maintained. A Manufacturing PMI above 42.3% over a period of time indicates an overall economic expansion.
The manufacturing industries reporting June growth were Apparel, Leather and Allied Products; Petroleum and Coal Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Furniture and Related Products; Computer and Electronic Products; Machinery; Food, Beverage and Tobacco Products; and Electrical Equipment, Appliances and Components. The industries reporting contraction in June were: Textile Mills; Wood Products; Paper Products; Chemical Products; Transportation Equipment, and Fabricated Metal Products.
