U.S. Services Expansion on a Two-Year Run

By SBE Council at 7 July, 2026, 11:47 am

by Raymond J. Keating -

The U.S. services sector experienced the 24th straight month of expansion in June, according to the latest read of the Institute of Supply Management's Services PMI index.

The ISM services PMI registered 54 percent, down slightly from May's 54.5 percent.

Two years of services being in expansion mode obviously is welcome. A reading above 50 generally means that the services sector is expanding, and below 50 means it's contracting.

However, some movement in the wrong direction in a few areas warrants watching. Steve Miller, Chair of the Institute for Supply Management Services Business Survey Committee, reported:

"The Business Activity Index remained in expansion territory in June, decreasing 2.3 percentage points to 55.4 percent from May's reading of 57.7 percent. The New Orders Index registered 55.1 percent, 2.2 percentage points below May's figure of 57.3 percent."

The positives, though, remain, with employment moving in positive territory in June. Miller noted:

"The Employment Index expanded for the first time in four months with a reading of 51.2 percent, a 3.3-percentage point increase from the 47.9 percent recorded in May. All of the four subindexes that make up the composite PMI were above their 12-month moving averages."

In June, 14 services industries reported growth: "Arts, Entertainment & Recreation; Mining; Wholesale Trade; Transportation & Warehousing; Finance & Insurance; Accommodation & Food Services; Retail Trade; Other Services; Professional, Scientific & Technical Services; Health Care & Social Assistance; Information; Construction; Utilities; and Real Estate, Rental & Leasing."

Meanwhile, four industries reported contraction: "Agriculture, Forestry, Fishing & Hunting; Educational Services; Management of Companies & Support Services; and Public Administration."

Of course, prices remained a major negative, although the index pointed to movement in the right direction:

"The Prices Index decreased to 67.7 percent, its lowest reading since February 2026 (63 percent). In this month's report, some respondents reported reduced prices paid for gasoline and diesel, but this was not seen across the board."

For good measure, Miller pointed out, "Respondents in June commented less frequently about pricing impacts on petroleum products, while tariff impacts continued to be a theme for increased pricing pressure."

Combine the services PMI with the manufacturing PMI, and the latest ISM surveys point to continued economic growth.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. He is the author of " The Weekly Economist " book series, and 10 Points from Walt Disney on Entrepreneurship .