US Service Sector Expands at Slower Pace in June

The US service sector expanded in June, but at a slower pace, according to the Institute for Supply Management’s services index, which fell 0.5 point to 54. Despite the slowdown, firms boosted payrolls as cost pressures eased, with the employment index jumping by the most since 2024. The data suggests services growth remains resilient, though hiring trends may stay uneven. The index’s reading above 50 indicates growth, and the figure was in line with economists’ expectations. Measures of business activity and new orders cooled, but still signaled solid demand. Prices continued to rise, but at a more subdued pace, with the group’s gauge falling to a four-month low of 67.7. The easing of cost pressures, paired with resilient consumer demand, may have given firms more space to pursue hiring plans. The transportation and warehousing sector reported gains in June, and World Cup-related hiring likely contributed to the increase in the employment index. A measure of inventories dropped sharply in June, suggesting companies are no longer stockpiling goods to get ahead of war-related supply-chain disruptions. A gauge of order backlogs rose, and respondents commented less frequently about the prices of petroleum products, but tariffs continued to be an issue.