Growth in the U.S. services economy continued in June, according to two closely watched measures of business activity.
The Institute for Supply Management (ISM) and S&P Global released their June services data on July 6. The ISM index declined while the S&P Global index edged up, although both remained firmly above the 50-point threshold separating expansion from contraction.
Together, the readings suggest that the services sector, which accounts for more than two-thirds of U.S. economic output, remains resilient despite geopolitical uncertainty and persistent cost pressures.
S&P Global’s U.S. services purchasing managers’ index rose by a modest 0.5 points in June to 51.2, just below forecasts of 51.3. The reading marked the strongest expansion in four months, following the outbreak of the United States and Israel’s war with Iran.
Chris Williamson, chief business economist at S&P Global, said conditions improved in June but cautioned that the overall pace of growth “remains lackluster compared to that seen at the start of the year before the conflict.”
“Similarly, while business growth expectations for the year ahead improved in June, they remained subdued compared to that seen prior to the war as businesses lack clarity over the outlook, both from economic and geopolitical contexts,” Williamson said in a statement.
Anticipations that the Federal Reserve could move interest rates higher also “acted as a further headwind to growth,” particularly in the financial services sector, where business confidence remained “especially muted,” he added.
Based on the latest survey data, Williamson estimated that the U.S. economy grew at an annualized rate of about 1.2 percent in the second quarter.
Meanwhile, ISM’s services purchasing managers’ index fell to 54 in June from 54.5 in May. Despite the modest slowdown, the reading matched market expectations and marked the sixth consecutive month of expansion.
ISM’s new orders index fell to 55.1 from 57.3, while its business activity index declined to 55.4 from 57.7.
Some of that slowdown may reflect the fact that companies that had placed large advance orders in response to the Middle East war returned to more normal purchasing patterns, according to survey analysts. Still, the backlog of orders index rose sharply to 54.9 from 51.3 in May, suggesting that demand has not disappeared.
The two surveys diverged when it comes to the labor market. ISM’s services employment index jumped to 51.2 in June from 47.9 in May, marking its largest one-month increase since 2024 and a return to the expansion territory.
Of the 18 services industries tracked by the ISM, nine—representing more than 58 percent of U.S. gross domestic product—reported higher employment levels in June. Among the strongest hirers were retail trade; construction; professional, scientific, and technical services; accommodation and food services; finance and insurance; and wholesale trade.
“This represents widespread confidence that hiring is again warranted to support activity levels,” said Steve Miller, chair of ISM’s Services Business Survey Committee.
S&P Global, by contrast, found that what it described as “muted business conditions” continued to discourage firms from expanding their workforces, with a net loss of jobs reported for the third time in four months.
Both surveys noted the impact of the ongoing FIFA World Cup. ISM said the tournament may have provided some support to its employment figures, while S&P Global said increased demand linked to the game helped lift new business inflows at the fastest pace since February.
Tariffs and oil prices also continued to shape cost pressures across the sector, according to the surveys.
Although falling oil prices helped slow the pace of services inflation, businesses continued to face elevated input costs. ISM’s prices paid index fell to 67.7 in June from 71.3 in May, but remained at a historically high level.
