The non-manufacturing purchasing managers' index fell from 54.5 in May to 54.0 in June, according to ISM. However, employment in the sector rose to 51.2, suggesting a stable labour market.
The Institute for Supply Management (ISM) published its non-manufacturing purchasing managers' index on Monday, which recorded a decline from 54.5 points in May to 54.0 in June. This slight drop indicates that activity in the services sector, which accounts for more than two-thirds of the US economy, is moderating after a period of strong momentum.
Demand cools after the agreement with Iran
According to ISM, the dynamism of previous months was partly due to the urgency to place orders amid the geopolitical conflict in the Middle East. However, the preliminary agreement between the United States and Iran has reduced tensions, and demand has faded in recent weeks.
This cooling of demand has contributed to the overall index decline, although the contraction is not severe. Levels above 50 indicate expansion, so the sector continues to grow, but at a slower pace.
Employment surprises on the upside
One of the standout figures from the report is the rebound in the employment index for the services sector, which rose from 47.9 in May to 51.2 in June. This increase suggests that companies are hiring again after a month of contraction, pointing to a possible stabilisation of the labour market.
Economists surveyed by ISM indicate that the labour market could maintain a trend of low hiring and few layoffs in the coming months. This would be good news for workers, who see employment remaining steady despite the economic slowdown.
Delivery times remain burdened
The supplier delivery index decreased from 55.2 in May to 54.4 in June, reflecting longer delivery times. Although under other circumstances, slower deliveries could be associated with high demand, in this case, ISM attributes the delay to ongoing difficulties in supply chains.
This data is relevant for companies that rely on foreign inputs, as delays can affect their production and costs. For readers interested in the economy, it is worth noting that the moderation of demand has not resolved logistical issues, which could keep pressure on prices in some sectors.
Overall, ISM's data paints a picture of an economy stabilising after a period of high volatility. The slowdown in services activity is not alarming, and the rebound in employment offers some relief. The labour market, with a low unemployment rate and few layoffs, remains a solid pillar. For investors and analysts, the next BLS employment report will be key to confirming the trend.
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