The US economy showed clear signs of deceleration in June, according to the latest S&P Global Purchasing Managers' Index (PMI) data. The Services PMI registered at 51.2, missing the market forecast of 51.4 and down sharply from May’s final reading of 54.8. Meanwhile, the Composite PMI came in at 51.9, below the expected 52.2 and down from 54.5 in May. Both figures still signal expansion—readings above 50 indicate growth—but the pace has moderated significantly.
The services sector, which accounts for two-thirds of US economic activity, was the primary drag. The Services Business Activity Index fell to 51.0, missing the 52.6 forecast, as new business inflows expanded at the weakest rate in months. Consumers and businesses are becoming more cautious, and hiring intentions have also softened. In contrast, the Manufacturing PMI edged higher to 51.7 from 51.3, beating estimates, but the overall picture is one of uneven momentum.
For financial markets, the softer data could be interpreted positively for risk assets. A cooling economy reduces the urgency for further aggressive Federal Reserve rate hikes, potentially leading to a pause or even a cut later in the year. Treasury yields and the US dollar dipped modestly after the release, while cryptocurrencies—which tend to benefit from a looser monetary environment—could see improved sentiment. The data adds to the narrative of a 'Goldilocks' scenario: slow enough to tame inflation but not yet recessionary, though economists caution that one month's data does not make a trend.
