The latest Services ISM® Report On Business® indicates a contraction in the services sector for the third time in 49 months, with the Services PMI® registering 48.8 percent in June, indicating sector contraction for the third time in 49 months. This is a 5 percentage point decrease from May's figure of 53.8 percent. The Business Activity Index registered 49.6 percent, 11.6 percentage points lower than May's 61.2 percent, marking the first month of contraction since May 2020. The New Orders Index contracted for the first time since December 2022, with a figure of 47.3 percent, 6.8 percentage points lower than May's reading of 54.1 percent. The Employment Index also contracted at a faster rate in June, with a reading of 46.1 percent, a 1-percentage point decrease compared to May. Additionally, the Supplier Deliveries Index registered 52.2 percent, indicating slower supplier delivery performance. The US services sector contracted in June at the fastest pace in four years due to a sharp pullback in business activity and declining orders. The Institute for Supply Management’s composite gauge of services slumped 5 points to 48.8, far weaker than all forecasts. The Institute for Supply Management also reported that US manufacturing contracted for a third straight month in June, with a PMI reading of 48.5, indicating a decline in the manufacturing sector. Economists had previously forecasted growth, but manufacturing has been pressured by higher interest rates and softening demand for goods. These reports have led to a surge in Treasury yields and have implications for the broader economy. The decline in the latest services survey from the Institute for Supply Management is closely watched by markets and points to the first contraction in the services sector in 49 months. These reports indicate a significant downturn in economic activity, with implications for various sectors and the broader economy.
