U.S. Business Activity Grows for Third Month in June

In June, growth in U.S. business activity accelerated for the third consecutive month, driven primarily by strong demand in manufacturing and production.

The Flash Composite Purchasing Managers Index (PMI) climbed to a five-month high of 52.2, up from 51.5 in May, according to S&P Global. This increase exceeded economists’ expectations significantly.

Derived from surveys of supply chain managers and business executives, the PMI is considered a preliminary measure, hence its “flash” label. The composite PMI combines responses from both the service and manufacturing sectors.

The flash manufacturing PMI for June reached 55.7, an uptick from 55.1 in May and the highest level since May 2022. This index has shown an upward trend for four months. A figure above 50 signifies growth in manufacturing, and expectations had been for a decline in this index.

Production growth increased to the fastest pace since July 2021, accompanied by new orders showing the most significant growth since April 2022.

S&P Global noted that concerns about supply chains and rising prices, particularly related to the Iran war, were factors in this acceleration. Companies have been increasing their inventory and parts as a precaution. Input purchases grew at the fastest rate since September 2021, and in June, raw material inventories recorded their highest rise in nearly two decades, aside from a spike following the announcement of tariffs in 2025.

The decision to build inventory and accelerate purchases reflects a level of optimism regarding future demand. This situation suggests what some economists refer to as “amplifying uncertainty,” as businesses respond to heightened uncertainty and potential supply constraints by boosting investments, possibly aiming to gain market share or stave off losses to competitors with ample inventories.

However, even with a significant surge in activity, growth in the services sector remains lackluster. New orders and production growth have been described as “moderate” by S&P Global, with the World Cup contributing in some instances to slight growth. “Service providers frequently cite escalating prices, high interest rates, and low consumer trust,” the report highlighted.

Supply chains are still under strain, with delivery delays becoming more common in June. Delivery times were reported as the longest since August 2022. Input costs saw a considerable rise, though not as rapid as in May. Average prices for goods and services reflected a pace consistent with the high inflation noted in May, which marked its highest point since July 2025. Service sector prices also saw inflation reach an 11-month high.

According to S&P Global, payrolls decreased for the second month in a row. The report indicated that rising raw material prices have led many companies to focus on cutting costs. While there was only a slight decline in employment within the service sector, manufacturing faced the fastest rate of job cuts since the pandemic began. These findings contrast sharply with government figures, which indicated an average increase of 188,000 jobs per month for three consecutive months up to May.

The outlook for production next year saw improvement in June, reaching its most promising level since February, with both manufacturing and services showing gains. This positive outlook is somewhat tied to the anticipation that disruptions related to the war and price pressures may begin to decrease. Recently, the U.S. and Iran announced a preliminary agreement aimed at concluding their ongoing conflict.