Services Surveys Signal 'Expansion' In June, Inflation Fears Remain High

On the heels of strong Manufacturing survey data this week, US Services data expectations were more mixed for June (PMI exp down, ISM exp up) amid a sudden plunge in 'hard' data.

• S&P Global US Services PMI fellfrom 53.7 to 52.9 in June (below the 53.1 expectations) - still above 50 (expansion).
• ISM Services rosefrom 49.9 to 50.8 in June (above the 50.6 expectations) - back above 50 (expansion)

Baffle 'em with bullshit...

Source: Bloomberg

Under the hood, the picture was more mixed with new orders rising back into expansion territory but employment falling further and prices paid dipping modestly (from two year highs)...

Source: Bloomberg

Positive responses:

• “After several slow months, business is starting to increase. New requests are going out to suppliers.” [Other Services]
• “Business seems to be picking up. Many of the macroeconomic factors that were concerning look to be playing out in our favor. High interest rates are still a problem. Supplies are ample for current business levels.” [Wholesale Trade]
• “Restaurant sales and traffic remain flat to prior year. Staffing is adequate for our current needs, and no supply chain concerns this month.” [Accommodation & Food Services]
• “Prices have gone up from tariff recovery fees — separate line items — but the supply chain, deliveries and inventories have remained mostly stable after the initial disruption. Costs continue to increase across the board, so our goal is to mitigate that.” [Health Care & Social Assistance]

Negative responses:

• “Confidence in a predictable economic environment has eroded to a point where capital investments are being severely curtailed.” [Professional, Scientific & Technical Services]
• “Increased cost from tariffs and the potential for tariffs is impacting cost increases. Higher cost of high-dollar items like 150-horsepower farm tractors are forcing farmers to delay purchasing or purchase used equipment. Tension in the Middle East is creating great concern and uncertainty.” [Agriculture, Forestry, Fishing & Hunting]
• “Sales remain stubbornly slow due to affordability issues with higher mortgage rates and high property values. Residential construction has embarked on cost-cutting measures through value engineering, supplier margin reductions and layoffs.” [Construction]
• “General uncertainty around the economy continues to drive increases in prices. Also, lots of SaaS (software-as-a-service) vendors are using the AI (artificial intelligence) boom to restructure pricing and products, resulting in massive increases.” [Information]
• “Business growth is slow. Global economic conditions impacted by U.S. tariffs are creating significant uncertainty, which is holding businesses back from making short- to medium-term business decisions.” [Real Estate, Rental & Leasing]
• “General uncertainty around the economy continues to drive increases in prices. Also, lots of SaaS (software-as-a-service) vendors are using the AI (artificial intelligence) boom to restructure pricing and products, resulting in massive increases.” [Information]