US ISM Services Index (Jun. 2026)

Inflation pressures softening, albeit slowly

The fall in both the ISM services and manufacturing prices paid indices in June brings our weighted index across the two sectors to a four-month low of 69.1 Based on past form, this is consistent with all-items CPI inflation falling to a little over 3% in the third quarter, which will provide some support to the doves on the FOMC arguing that economic conditions don’t yet warrant rate hikes.

The headline index fell to 54.0 from 54.5 in June, which, together with a slight fall in the manufacturing index leaves our weighted composite ISM index consistent with real GDP growth remaining around 2% annualised in Q2. The decline was driven by a 2.2 point fall in the forward-looking new orders component to 55.1 and a 2.3 point fall in the business activity index to 55.4. Meanwhile, the fall in the suppliers deliveries and inventories indices suggest that the impacts from firms front-running orders due to supply concerns during the Iran war are dissipating.

Along with the slight easing in price pressures, another bright spot was the 3.3 point rise in the employment index to 51.2. This marked the first time since the Iran war in which the index has been above the 50 theoretical no-change mark. Interestingly, the press release put some of the gain down to “World Cup-related hiring” – something which was not evident whatsoever in June’s payrolls report. Either way, it lends some support to our view that the labour market will continue to gather momentum over the rest of this year.