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Report On Business® Roundup: June Services PMI®

July 03, 2025
By Dan Zeiger

The Services ISM® Report On Business® returning to expansion was among a battery of economic data on Thursday that was well-received by markets, with the federal jobs report that exceeded expectations getting most of the focus.

The Services PMI® registered 50.8 percent, an increase of 0.9 percentage point compared to the previous month and the fourth straight contraction one-off for the sector. After contracting in December 2022 (49 percent), April 2024 (49.6 percent), June 2024 (49.2 percent) and May (49.9 percent), the PMI® rebounded the following month.

The last consecutive readings below 50 percent were April and May 2020, as the coronavirus pandemic engulfed the globe. Though some panelists’ comments in June indicated economic uncertainty was impacting their companies’ planning, the Services PMI® continues to reflect not just stability, but mild growth.

“The improvements in business activity and new orders more than made up for (a contraction in employment) and helped bring the index above 50 percent,” Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee, said on ISM’s LinkedIn Live broadcast on Thursday. “That was the good news.

“The not-bad but not-so-great news is that the Backlog of Orders Index continues to contract. And we’ve started looking at the average of the New Orders Index and the backlog reading, comparing it to periods where there have been issues in the overall economy.”

In May, the average of the New Orders and Backlog of Orders indexes was 44.9 percent. With the former improving to 51.3 percent in June but the latter contracting further at 42.4 percent, that average was 46.9 percent — an improvement, but still close to a level associated with the Great Recession and the early stages of the pandemic.

That combination will bear watching over the next month, Miller told a conference call of reporters earlier Thursday, because it means one of two things: “If new orders are strong with backlogs decreasing, that can indicate new orders going in the system and higher backlogs next month,” he said, “or there’s been good productivity in terms of providing and delivering services like construction, utilities or health care.”

However, Miller added, “The alternate scenario is that if new orders dry up and backlogs stay low, that will create some pressure.”

Such uncertainty is a product of the current trade environment, as multiple panelists elucidated in their comments. “Confidence in a predictable economic environment has eroded to a point where capital investments are being severely curtailed,” wrote a respondent in Professional, Scientific & Technical Services.

The increases in the New Orders and Business Activity (54.2 percent, up 4.2 percentage points compared to May) might have been — as was suggested in ISM’s Manufacturing report on Tuesday — the result of motivated buyers during a 90-day tariff pause on most countries that is slated to end on Wednesday.

Tariffs had an impact on costs, though the Prices Index decreased 1.2 percentage points to 67.5 percent. Some panelists noted that tariffs costs began hitting in June.

In the ISM® Supply Chain Planning Forecast released in May, nearly half of Services respondents indicated they would raise prices when their imports are tariffed (37 percent) or after three months (12 percent). If those companies follow through, their success in passing tariff increases though “would be indicative of what inflation will look like” later in the year, Miller said.

Lastly, a sweeping federal tax and policy bill passed the U.S. House of Representatives on Thursday and is expected to be signed by President Donald Trump on Friday. The legislation extends the 2017 federal tax cuts, funding boosts for the Pentagon and border security, and imposes significant restrictions on Medicaid, among other measures.

Miller said on the LinkedIn Live broadcast that services businesses could benefit if the bill’s tax reductions on tips and overtime pay lead to an increase in consumer spending. He also cited a tax deduction for car loan interest as a positive not only for retail businesses, but also companies that buy vehicles as capital equipment.

Is the bill a boost for health care? “No,” Miller said. (For more, see Inside Supply Management®’s coverage of the Hospital ISM® Report On Business® after the June data is released on Tuesday.)

The Report On Business® roundup:

Bloomberg: U.S. Service Providers Expand at Modest Pace as Employment Slows. “The figures highlight a slowdown in the economy so far this year as consumers and companies contend with the fallout from the Trump administration’s trade policy that includes higher tariffs.”

CNBC: ISM Services PMI® 50.8 Percent Versus 50.5 Estimated. “If we look at the (Prices Index), we’d prefer that to go down. It actually did — 68.9 percent expected and 68.7 in (May), so a very subtle drop, to 67.5 percent,” analyst Rick Santelli said. He added, “(Markets) are holding on to the gains of the better-than-expected jobs report. Yields and equities are up.”

Logistics Management: Services Output Returns to Growth in June, Reports ISM. “(A)n Information sector panelist observed that general uncertainty around the economy continues to drive increases in prices, adding that many SaaS (software-as-a-service) vendors are using the AI (artificial intelligence) boom to restructure pricing and products, resulting in massive increases.”

MarketWatch: Biggest Part of the U.S. Economy Rebounds From Trade-War Blues. “But It’s Still Weak. The relaxation of extreme tariffs on China and other countries in May has eased worries about the U.S. economy and spurred the stock market to new record highs. Yet as a pair of ISM reports this week showed, the economy still hasn’t regained the momentum it lost after the White House in the spring launched the biggest trade wars in decades.”

Reuters: U.S. Services Sector Rebounds but Employment Contracts Again. “(The Employment Index reading) is consistent with other data that have suggested a loss of labor market momentum amid a hesitancy by businesses to step up hiring. The ISM has noted that "higher scrutiny is being placed on all jobs that need to be filled, whether it be a new position or backfill for an existing role.”

In case you missed Tuesday’s Report On Business® Roundup on the release of the June Manufacturing PMI®, you can read it here. The Hospital PMI® will be released on Tuesday. For the most up-to-date content on the reports under the ISM® Report On Business® umbrella, use #ISMPMI on X, formerly known as Twitter.

(Photo credit: Getty Images/Predrag Vuckovic)

About the Author

Dan Zeiger

About the Author

Dan Zeiger is Senior Copy Editor/Writer for Inside Supply Management® magazine, covering topics, trends and issues relating to supply chain management.