The latest S&P Global PMI data for June 2025 paints a nuanced picture of the U.S. economy. While business activity remains in expansion territory, signals of a mild deceleration are emerging—particularly in the services sector. Meanwhile, a surprising rebound in manufacturing lifted overall sentiment, even as the composite index edged lower.

Services PMI Holds Above 53, but Momentum Softens

The S&P Global U.S. Services PMI for June came in at 53.1, slightly above the market consensus of 53.0. Although this level still reflects ongoing expansion, it marks a mild slowdown compared to previous months, where readings hovered around the 54.0 mark.

This deceleration may stem from softer demand growth, rising input costs, or uncertainty regarding consumer sentiment in light of ongoing interest rate volatility. With the Federal Reserve maintaining a cautious stance and no firm timeline for rate cuts, service providers may be reassessing hiring and investment strategies.

Manufacturing Surprise: PMI Jumps to 52.0, Beating Forecasts

The Manufacturing PMI posted the most notable surprise, rising to 52.0 in June—outperforming expectations of 51.0 and marking its highest reading since early 2024. This is the clearest indication in months that industrial activity is gaining traction after a prolonged period of stagnation.

Several factors could be fueling this rebound: a shift in supply chains back to the U.S., fiscal incentives promoting domestic production, and gradual normalization in global trade flows. It’s a welcome sign for investors watching for signs of reindustrialization amid geopolitical reshuffling and reshoring trends.

Composite PMI Slips Slightly to 52.8: A Mixed Signal

The Composite PMI, which combines services and manufacturing data, declined marginally from 53.0 to 52.8. While still firmly in expansion territory, the modest dip suggests the overall pace of economic growth has lost some steam in June.

This trend may reflect broad-based uncertainty, including tighter credit conditions, fluctuating consumer demand, and corporate hesitancy around capital expenditures. Nonetheless, staying above the 50-point threshold indicates the U.S. economy is still expanding, albeit at a slower pace.

Market Interpretation: Reacceleration or Start of a Slowdown?

The divergence between manufacturing strength and service-sector moderation has sparked debate about the next phase of the U.S. business cycle. Bulls may point to the manufacturing resurgence as evidence of a broader recovery, supported by favorable inventory dynamics and rising orders.

However, the services slowdown—coupled with ongoing disinflation, tight labor markets, and cautious corporate earnings guidance—raises questions about whether economic momentum can be sustained through the second half of the year.

For investors and policymakers alike, the PMI data underscores the complexity of the current environment. While some indicators flash green, others hint at vulnerabilities that could surface if consumer confidence falters or monetary policy stays restrictive for too long.

Implications for the Fed: Eyes on July and Beyond

With the Fed’s next rate decision looming in July, these PMI figures will likely factor into deliberations. The fact that both services and manufacturing remain in growth territory could reinforce the Fed’s patient stance—waiting for more decisive data on inflation and the labor market before pivoting.

Investors should pay close attention to upcoming economic releases, including the ISM indices, core PCE inflation, retail sales, and jobless claims. These data points will either confirm June’s early signs of resilience—or raise red flags that the soft landing narrative is under threat.

Bottom Line: Solid, but Not Spectacular

The June PMIs suggest that the U.S. economy is navigating a delicate balance. Growth continues, but at a tempered pace. The services sector is showing signs of fatigue, while manufacturing finally offers a bright spot after months of disappointment.

Whether this marks the beginning of a new phase of expansion or a short-lived uptick in an otherwise sluggish macro environment remains to be seen. For now, the data offer reassurance—but also a reminder that the recovery is far from linear.