The Institute
for Supply Management (ISM) announced on Wednesday that its Services PMI came
in at 48.8 per cent in June, recording a decline of 5.0 percentage points from
an unrevised May reading of 53.8 per
cent. The latest figure indicated
that economic activity in the U.S. services sector contracted again in June after
May’s rebound.
Economists had predicted
the indicator to slip to 52.5 in June.
A reading above
50 signals expansion, while a reading below 50 indicates contraction.
According to
the report, the Production index plunged by 11.6 percentage points to 49.6 per cent in June, indicating contraction for the first
time since May 2020. In addition, the New Orders gauge tumbled by 6.8
percentage points to 47.3 per cent, indicating shrinkage for the first time
since December 2022. The Employment measure dropped by 1.0 percentage point to 46.1
per cent, indicating employment activity in the services sector contracted in June
for the fifth straight month. Elsewhere, the Inventories
indicator plummeted by 9.2 percentage points to 42.9 per cent, indicating inventories
decreased in June after two consecutive months of growth. The Supplier Deliveries indicator slipped by 0.5 percentage point to 52.2 per cent, indicating slower
performance for the second successive month. On the price front, the Prices index decreased by 1.8 percentage
points to 56.3 per cent, indicating that prices paid by services organizations for materials and
services increased in June for the 85th month running.
Commenting
on the data, Steve Miller, CPSM, CSCP, Chair of the Institute for Supply
Management (ISM) Services Business Survey Committee noted that the June fall in
the composite index was a result of notably lower business activity, a
contraction in new orders for the second time since May 2020 and continued
contraction in employment. “Survey respondents report that, in general, business
is flat or lower, and although inflation is easing, some commodities have
significantly higher costs,” he added.