Key Highlights

  • US Services PMI rose to 51.3 in June from 50.7 in May, modestly above the market consensus of 51.0, in a preliminary estimate.
  • Services input cost inflation climbed to a six-month high in June, while selling price inflation reached its highest level in eleven months.
  • Supplier delivery times lengthened markedly, linked to shipping disruptions from the Middle East conflict and ongoing tariff pressures.
  • Business sentiment improved but remained well below long-run averages, with uncertainty over tariffs, interest rates, and the Middle East war continuing to weigh on confidence.

US services sector activity expanded at a slightly faster pace in June 2026, with the S&P Global Services PMI rising to 51.3 from 50.7 in May. The preliminary reading came in just above the market consensus of 51.0 and marked the strongest services expansion since February, partly supported by demand linked to the FIFA World Cup. While the headline number signals continued growth, the details of the report point to a sector navigating meaningful headwinds on cost, confidence, and supply.

Output and new orders both rose only modestly during June, with firms citing high price levels, elevated interest rates, and subdued confidence among businesses and consumers as factors constraining activity. The services sector expansion has remained narrow since the start of 2026, with readings hovering just above the 50-point threshold that separates growth from contraction.

Price pressures intensified during the month. Services input cost inflation rose to its highest level in six months, while selling price inflation reached an eleven-month high. The combination points to continued margin compression for firms unable to fully pass costs through to customers, and reinforces the argument for sustained Federal Reserve attention to services inflation, which has proved stickier than goods inflation through the current cycle.

Supply chains added further complexity. Supplier delivery times lengthened markedly in June, with firms attributing delays to shipping disruptions linked to the ongoing Middle East conflict and the cumulative impact of tariff-related logistics adjustments. Employment fell for a second consecutive month, mirroring the pattern seen in manufacturing and suggesting that service sector firms are also managing costs through workforce restraint.

Business expectations for output over the coming year improved modestly, but sentiment remained well below long-run historical averages. Uncertainty surrounding tariff policy, the trajectory of interest rates, and the geopolitical environment in the Middle East continues to suppress confidence, limiting the services sector's capacity to accelerate meaningfully from current levels.

This article is for informational purposes only and does not constitute financial advice. Please consult a licensed financial adviser before making investment decisions.