US Services Sector Returns To Growth In June Amid Employment Decline

The U.S. service sector returned to growth in June 2025, with the Institute for Supply Management's services PMI rising to 50.8 from 49.9 in May, signaling modest expansion after a brief contraction. This improvement was driven by rebounds in new orders, business activity, inventories, and new export orders, though employment contracted for the third time in four months, reflecting ongoing job cuts and economic caution. Despite the growth, concerns persist about inflationary pressures and the impact of tariffs, particularly with the end of President Trump's 90-day tariff pause with China approaching, which could unsettle the market further. Prices for service inputs remain elevated, although slightly eased, and economists are watching for potential Federal Reserve rate cuts in September as the central bank assesses these inflation risks. Meanwhile, the UK services sector also showed its fastest growth in ten months in June, with new orders rising and inflation pressures easing, although employment shrank for the ninth consecutive month amid rising payroll costs. The mixed signals from both the U.S. and UK services sectors highlight a cautious economic environment with ongoing inflation and employment challenges.