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U.S. ISM Services Index (June 2025)

Leslie Preston, Managing Director & Senior Economist | 416-413-3180

Date Published: July 3, 2025

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ISM services tips back into expansion in June

  • The ISM Services index tipped back into expansionary territory in June, rising to 50.8, after one month in contraction in May. Interestingly, the same number of industries reported growth in June as in May (10 of 18), but still down from 14 at the start of the year.
  • Business activity improved 4.2 points to 54.2, while new orders jumped a sharper 4.9 points to 51.3. However, the backlog of orders remained in contraction, falling a point to 42.4.
  • The employment subindex tipped into contractionary territory, falling 3.5 points to 47.2.
  • Somewhat surprisingly, the prices paid sub-component fell 1.2 points to 67.5. However, this level remains well above the trend over the past couple of years, and price increases impacting cost of operations was mentioned frequently by survey respondents.

Key Implications

  • Today's ISM Services report was expected to return to expansion in June, after flirting with contraction in May, and is consistent with the June jobs report in reinforcing the resilience of the U.S. economy. Still, a reading of 50.8 is below the average of the past 12 months pointing to a softening in conditions in the services sector. The sentiment on employment also bears watching as private sector services hiring did slow noticeably in June. 
  • The modest improvement in services sector sentiment June is consistent with uptick seen in the Manufacturing ISM released earlier this week. Perhaps purchasing managers are getting over their initial shock from some of the early tariff announcements, as their worst fears have not been immediately realized. However, zooming out, the trend does point to cooling in the broader economy, which we expect to be a theme in the second half of the year. 

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