The Services Sector Purchasing Managers Index (PMI) from the Institute for Supply Management (ISM) fell 5.0 points to 48.8, missing forecasts and signaling contraction (<50.0) in the services economy. This is the second time in the last three months that the Services PMI has contracted, which is a rare occurrence – only happening a handful of times outside of a recession, most occurring in the last two years.
Almost all sub-components of the Services Sector PMI worsened in June. The New Orders Index, which tends to be leading, fell 6.8 points and saw its first contraction since December 2022. In addition, the Employment Index, which has contracted for six of the last seven months, declined at an even faster rate.
It’s rare to see dual contraction – both in the Services and Manufacturing Sectors – without a corresponding recession. If deterioration continues, the rest of the economy will likely follow suit.