U.S. Services Sector Expands for 24th Straight Month as ISM® Services PMI® Hits 54% in June 2026

Summary

The U.S. services sector expanded again in June 2026, with the ISM® Services PMI® registering 54%, marking the 24th consecutive month of growth. Business activity, new orders, employment, supplier deliveries, and backlogs all remained in expansion territory, signaling steady demand and continued economic resilience.

What Drove Services Growth in June 2026

The June report shows broad‑based strength across the services economy, even as momentum cooled slightly compared to May.

1. Business Activity Remains Strong
   The Business Activity Index registered 55.4%, still firmly in expansion despite a 2.3‑point decline from May. This indicates companies continue to see healthy demand for services.

2. New Orders Continue Expanding
   New Orders came in at 55.1%, down from May’s 57.3% but still signaling robust customer demand. This is a key indicator of future activity and remains well above the 50% growth threshold.

3. Employment Turns Positive for the First Time in Four Months
   The Employment Index rose to 51.2%, a 3.3‑point jump from May’s contractionary reading of 47.9%. This suggests service‑sector hiring is stabilizing.

4. Supplier Deliveries Slow: A Sign of Rising Demand
   Supplier Deliveries registered 54.4%, marking the 19th straight month of slower deliveries typical in an improving economy. Above‑50 readings indicate suppliers are taking longer due to increased demand.

5. Prices Ease but Remain Elevated
   The Prices Index fell to 67.7%, its first reading below 70% since February. Diesel, gasoline, oil, and related commodities were frequently cited as both up and down in price depending on contract terms.

Inventory and Backlog Trends

Inventories Cool Sharply
Inventories dropped to 51.2%, down a significant 11.3 points from May’s unusually high 62.5%. This suggests companies are adjusting stock levels after a surge in May.

Inventory Sentiment Still Positive
The Inventory Sentiment Index registered 52.6%, marking its 38th consecutive month of expansion. Firms generally believe inventories are sufficient for current demand.

Backlog of Orders Strengthens
Backlogs rose to 54.9%, up 3.6 points from May. This indicates demand is strong enough to create order queues.

What This Means for the U.S. Economy

The services sector which represents roughly 70% of U.S. GDP continues to show resilience.

Key Implications

• Steady demand despite cooling momentum
• Improving labor conditions with employment returning to growth
• Moderating inflation pressures as prices ease
• Healthy future pipeline with expanding new orders and backlogs
• Supply‑chain normalization as inventories adjust and deliveries slow predictably

Overall, June’s report reflects a services economy that is expanding at a sustainable pace.

Key Takeaways

• ISM® Services PMI® registered 54% in June, 24 straight months of expansion.
• Business Activity: 55.4%
• New Orders: 55.1%
• Employment: 51.2% (first expansion in four months)
• Supplier Deliveries: 54.4% (19 months of slower deliveries)
• Prices: 67.7%, easing but still elevated
• Inventories: 51.2%, sharply lower
• Backlogs: 54.9%, strengthening

The services sector remains a stabilizing force for the broader U.S. economy.

FAQ

Is the services sector still expanding?
Yes, June marked the 24th consecutive month of expansion with a PMI® of 54%.

Are companies hiring again?
Yes, the Employment Index rose to 51.2%, ending a four‑month contraction.

Are prices still rising?
Prices are rising but at a slower pace, with the index falling to 67.7%.

What does slower supplier delivery mean?
Above‑50 readings indicate suppliers are taking longer due to increased demand, a typical sign of economic expansion.

ISM PMI June Report Explained: Manufacturing & Services Data Show Economic Expansion in 2026