U.S. ISM Services PMI Falls in June to the Lowest Level since May '20
Summary
• 55.3 in June vs. 55.9 in May, indicating economic activity in the services sector expands for the 25th straight month but at a marginally slower pace.
• Mixed movement in sub-indexes: business activity index rebounds while new orders index declines slightly and employment falls back to a contraction level.
• Prices index at 80.1, while down two pts. from May, remains at an elevated level.
The U.S. ISM Services PMI fell to 55.3 in June from 55.9 in May and 57.1 in April, according to the Institute for Supply Management. The June reading, below the peak of 68.4 in November and 60.7 last June, was the lowest level since May 2020's 45.2. However, the 12-month average was 60.8, reflecting consistently strong growth in the U.S. services sector. The Action Economics Forecast Survey had expected 54.5 for June.
Haver Analytics constructs a composite index combining the services index and the manufacturing reading. This index declined to 55.0 in June, the lowest level since May 2020, from 55.9 last month and 60.7 last June. These series date back to July 1997. During the last 15 years, there has been a 69% correlation between the composite index and the quarterly change in real GDP.
In the latest services survey, the business activity index rebounded to 56.1 in June from 54.5 in May, indicating business activity expansion for 25 consecutive months at a faster pace. Twenty-seven percent (NSA) of respondents reported higher activity this month, marginally down from 27.1% in May. A lessened 12.5% reported an activity decline, down from May's 13.3%. The new orders index declined to 55.6 after rising to 57.6. Twenty-eight (NSA) of respondents reported more orders while 14.0% reported a decline. The employment index fell back to a contraction-level 47.4, the lowest level since July 2020, from 50.2. Twenty percent (NSA) of respondents indicated higher employment, but 19.5% reported it lower. The percentage indicating that employment held steady rose to 60.1% of respondents. The supplier deliveries index (NSA) rose to 61.9 in June after falling to 61.3 in May. A marginally improved 5.0% of respondents reported faster delivery speeds while an increased 28.8% reported slower speeds.
The prices index fell to a still-elevated 80.1 in June, the second straight monthly fall to lowest level since September, from 82.1 in May and a record 84.6 in April; however, it was up from 78.8 last June. Sixty-six percent (NSA) of respondents reported price increases while 1.7% reported price decreases. A higher 32.2% reported stable prices this month vs. 26.8% in May.
The new export orders index fell back to a four-month-low 57.5 in June from 60.9 in May, indicating expansion in new export orders for the fifth successive month but at a slower pace. The backlog of orders index rebounded to a three-month-high 60.5 from 52.0. The inventories index decreased to 47.5, the lowest level since December, from 51.0. This also indicated that inventories contracted in June following four consecutive months of expansion and eight straight months of contraction. The imports index fell to 46.3 in June from 52.8 in May, showing the second contraction this year (first in March, 45.0). These series are not seasonally adjusted and not included in the ISM Services PMI total.
The ISM figures are available in Haver's USECON database, with additional detail in the SURVEYS database. The expectations figure from Action Economics is in the AS1REPNA database.
Winnie Tapasanun
AuthorMore in Author Profile »Winnie Tapasanun has been working for Haver Analytics since 2013. She has 20+ years of working in the financial services industry. As Vice President and Economic Analyst at Globicus International, Inc., a New York-based company specializing in macroeconomics and financial markets, Winnie oversaw the company’s business operations, managed financial and economic data, and wrote daily reports on macroeconomics and financial markets. Prior to working at Globicus, she was Investment Promotion Officer at the New York Office of the Thailand Board of Investment (BOI) where she wrote monthly reports on the U.S. economic outlook, wrote reports on the outlook of key U.S. industries, and assisted investors on doing business and investment in Thailand. Prior to joining the BOI, she was Adjunct Professor teaching International Political Economy/International Relations at the City College of New York. Prior to her teaching experience at the CCNY, Winnie successfully completed internships at the United Nations. Winnie holds an MA Degree from Long Island University, New York. She also did graduate studies at Columbia University in the City of New York and doctoral requirements at the Graduate Center of the City University of New York. Her areas of specialization are international political economy, macroeconomics, financial markets, political economy, international relations, and business development/business strategy. Her regional specialization includes, but not limited to, Southeast Asia and East Asia. Winnie is bilingual in English and Thai with competency in French. She loves to travel (~30 countries) to better understand each country’s unique economy, fascinating culture and people as well as the global economy as a whole.
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