U.S. ISM Services PMI Falls in June to the Lowest Level Since May 2020
Summary
- 48.8 in June vs. 53.8 in May; 3.3 pts. below the 12-month average of 52.1.
- Business Activity (49.6, the first contraction since May ’20), New Orders (47.3, the first contraction since Dec. ’22), Employment (46.1, the fifth straight contraction), and Supplier Deliveries (52.2, above 50 for the second successive month).
- Prices Index falls to a three-month-low 56.3, albeit remaining above 50 since June ’17.
The U.S. ISM Services PMI fell to 48.8 in June after rising to 53.8 in May, according to today’s report by the Institute for Supply Management, indicating contraction in the services sector for the second time in three months and for the third time in 49 months. The June reading was the fourth m/m fall in five months and the lowest level since May 2020. The index was below 53.6 in June 2023, a low of 49.0 in December 2022, and a record-high 67.1 in November 2021. The 12-month average was 52.1, reflecting relatively strong growth in the U.S. services sector. The Action Economics Forecast Survey had expected 52.5 for June.
Haver Analytics constructs a composite index combining the services index and the manufacturing reading. This index fell to 48.8 in June after increasing to 53.2 in May, showing contraction for the second time in three months and at the lowest level since May 2020. The latest figure was lower than 52.7 in June 2023, a contraction-level 48.9 in December 2022, and a record-high 66.3 in November 2021. These series date back to July 1997.
In the latest services survey, the business activity index plunged 11.6 pts. to 49.6 in June after a 10.3-point jump to 61.2 in May, indicating business activity contracted for the first time since May 2020. The index was down from a low of 52.7 in December 2022 and a record-high 69.5 in November 2021. Nearly twenty-two percent of respondents (NSA) reported higher activity in June while 21.1% reported an activity decline. The new orders index fell to 47.3 in June, the third m/m fall in four months, after increasing to 54.1 in May, indicating contraction in new orders for the first time since December 2022. The index was up from a low of 45.0 in December 2022 but down from a record-high 69.5 in October 2021. A lessened 16.5% of respondents (NSA) reported higher orders in June while an increased 20.4% reported a decline. Meanwhile, the supplier deliveries index (NSA) fell to 52.2 in June from 52.7 in May, indicating slower supplier delivery performance for the second successive month in June following three consecutive months of faster deliveries.
On the labor front, the employment index dropped to 46.1 in June after increasing to 47.1 in May, showing employment activity in the services sector contracted for the fifth straight month at a more severe pace. The latest reading, while above a low of 43.8 in December 2023, remained below a high of 58.3 in April 2021. A lessened 11.3% of respondents (NSA) indicated higher employment in June while 15.0% reported a decline.
On the inflation front, the prices index decreased to 56.3 in June after falling to 58.1 in May, indicating prices paid by services organizations for materials and services had risen (i.e., above 50) since June 2017 but at the slowest rate of increase in three months. The index, while slightly up from a low of 54.8 in June 2023, was below a high of 64.0 in January this year and a record-high 83.8 in March 2022. Twenty-one percent of respondents (NSA) reported price rises in June while 6.3% reported price declines.
Additionally, the new export orders index dropped to 51.7 in June after a 13.9-point jump to 61.8 in May, indicating new export orders expanded for the seventh time in eight months but at a slower rate. The imports index increased to 44.0 in June after falling to 42.8 in May, registering the second consecutive contraction in June following four consecutive months of expansion. The inventories index fell to 42.9 in June from 52.1 in May, indicating inventories contracted for the fifth time in seven months. The inventory sentiment index rebounded to 64.1 in June from 57.7 in May, showing expansion since May 2023 and at the highest level since July 2017. The backlog of orders index fell to 44.0 in June from 50.8 in May, showing contraction for the second time in six months. These series are not seasonally adjusted and not included in the ISM Services PMI total.
The ISM Services PMI is a composite index consisting of four equally weighted diffusion indexes (25% each): Business Activity, New Orders, Employment, and Supplier Deliveries. A reading above 50 indicates expansion in the services sector; below 50 suggests contraction. Supplier Deliveries is the only ISM index that is inversed; a reading above 50 indicates slower deliveries. 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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