• The S&P Global composite PMI fell to 51.9 in June, indicating slower but still positive expansion.
  • Services activity grew at a modest pace, with the services PMI at 51.2, while input costs and selling prices remained elevated.
  • The data suggests a resilient but cooling economy, with persistent inflation in services that could keep the Fed on hold.

Growth Moderates Amid Lingering Inflation

The US private sector expanded for the sixth consecutive month in June, but the pace of growth eased, according to the final S&P Global PMI readings. The composite output index slipped to 51.9 from May's 52.3, while the services PMI came in at 51.2, down from 51.3, signaling a continued but more modest expansion.

"The US economy showed resilience in June, even as the pace of growth softened," said an economist at S&P Global Market Intelligence. "However, price pressures remain stubbornly high, especially in the services sector, which could complicate the Fed's path to easing."

The report highlights a divergence: manufacturing appeared to stabilize, while services activity grew only marginally. New orders for services rose at the slowest rate since January, and employment in the sector expanded at a reduced pace. "We're seeing a 'two-speed' economy, where goods production is picking up but services are losing momentum," the economist added.

Price Pressures a Concern for Policy

Input costs in the services sector rose at the fastest pace in three months, driven by higher wages and energy costs. Selling prices also increased, suggesting firms are passing on costs to consumers. This persistence of services inflation may delay rate cuts, as the Fed watches for sustained disinflation.

"The data points to an economy that continues to generate growth, but not enough to bring down inflation quickly," said a market strategist at a major bank. "We expect the Fed to remain cautious, likely holding rates steady until there's clearer evidence that price pressures are under control."

Implications for the Second Half

With the composite PMI still above 50, the economy remains in expansionary territory, but the trend is one of deceleration. Analysts will closely watch upcoming ISM reports, jobs data, and inflation prints to gauge whether the slowdown deepens or stabilizes.

Businesses may face continued cost pressures and hiring challenges, while consumers could see higher prices for services. The global backdrop, including weak demand from trading partners and geopolitical uncertainties, also poses risks to the outlook.

Despite the cooling, analysts note that the economy has defied predictions of a sharper downturn. "The resilience is notable, but risks are tilted to the downside," a senior economist commented. "We need a few more months of data to see if this is a soft patch or the start of a softer landing."

For now, the PMI data suggests a delicate balance: growth is still happening, but the lack of momentum reopens questions about the sustainability of the recovery.

(Updated with final PMI figures and analyst comments)