The US Flash Composite PMI rose to 52.2 in June, led by a 49-month high in manufacturing. Services struggled. Cooling input costs and weak employment shape the Fed outlook.
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Business activity in the U.S. picked up in June, with the Flash Composite PMI Output Index rising to 52.2 from 51.5. That is the highest reading since January. Manufacturing drove the advance. The Manufacturing PMI climbed to 55.7, a 49-month high. The Manufacturing Output Index rose to 57.7, the strongest in nearly five years. Services also improved, though more slowly. The Services PMI Business Activity Index ticked up to 51.3 from 50.7, a four-month high.
S&P Global's Chris Williamson said progress toward peace in the Middle East boosted business confidence. Overall growth remains subdued relative to the pace before the conflict, he added. The survey is consistent with an economy expanding at little more than a 1% annualized rate in the second quarter. Services activity continued to face headwinds from consumer resistance to higher prices and weak confidence. Manufacturing, by contrast, got a boost from inventory building as firms sought to protect against supply disruptions. Supply delays became more widespread in June, suggesting concerns about supply chains have not fully disappeared. Williamson said the inventory builds may prove temporary if demand does not pick up.
The labor market was the weakest part of the report. Employment fell again. Manufacturing job losses were the fastest since 2009 outside of the pandemic period, according to Williamson. Businesses are increasingly concerned about the durability of recent demand growth and the impact of rising raw material costs, he said.
On inflation, there was some relief. Input costs, though still elevated by historical standards, cooled by the end of the survey period. Lower energy prices helped, the report showed. That supports the disinflation narrative the Federal Reserve has been watching. With services demand soft and employment declining, the tight labor market that fueled wage pressures is loosening. Forex market analysis will track how this shifts dollar positioning and rate expectations.
The combination of moderate growth and cooling inflation keeps the Fed on a steady path for now. Markets are pricing no move at the July 30-31 meeting. The final PMI reading for June is due July 1, which will offer a cleaner signal on whether the services drag deepens or manufacturing momentum carries through.
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