Insights 
VT 
The S&P Global final services PMI for June 2025 was recorded at 52.9, compared to the prelim of 53.1 and a prior figure of 53.7. The composite index stood at 52.9, slightly above the preliminary reading of 52.8.
The US service sector has witnessed sustained growth and increased hiring, though elevated price pressures persist, possibly affecting future monetary policy decisions. The economy expanded at approximately 1.5% annually in the second quarter, with demand prompting firms to hire at the highest rate since January.
Economic Challenges
Despite this, some sectors, especially exports and consumer-facing service providers, have shown signs of weakness, hindering broader economic growth. Concerns over government policies have led to uncertainty and reduced confidence, affecting service spending.
Price pressures remained high in June, with the inflation rate for services being the second-highest in over two years due to tariff-related cost increases. Although moderated by weak demand and competition, these pressures may contribute to higher consumer price inflation soon. Market movements were minimal, with the Federal Reserve’s year-end easing pricing at 52 bps, down from 62 bps before the non-farm payrolls data.
That recent PMI release suggests a still-expanding services sector in the United States, though with softer momentum than earlier in the year. The final figures edged slightly lower than initial estimates, which indicates that while activity remains positive, expectations may have leaned a little too optimistic at the outset.
Hiring remains strong – in fact, it’s picked up again to its fastest pace since the start of the year. That strength tells us firms are still seeing enough incoming work to justify expanding staff. But the detail shows it’s not all evenly spread. Business facing international markets or relying on household consumption are having a bit more trouble – either demand isn’t meeting forecasts, or clients are holding back amid unclear policy direction.
Persistent Inflation And Future Implications
On the price side, costs are still pushing higher, especially in services. The latest data puts inflation in that part of the economy at near multi-year highs – not driven by wage growth this time, but rather tariffs. Those levies are making inputs more expensive for companies, which may soon be passed on to consumers. It’s particularly noticeable in sectors where demand isn’t soft enough to force heavy discounting. Competition is offering some relief, but not uniformly.
There’s a clear message underneath this data: the economy isn’t flashing warning signs, but it is facing tight constraints. Businesses are reacting with caution. Clients are asking for more clarity before they commit. And while growth remains present, it’s leaning on specific areas rather than broad-based strength.
Yields adjusted only modestly, correcting after stronger-than-expected hiring data out of the labour market. Futures suggest the path of rate cuts has been trimmed slightly, indicating that expectations have aligned closer to a scenario where strong employment coexists with persistent inflation in parts of the service sector.
We’re watching this carefully now. Inflation in services acts with a lag, creeping up while wider demand may be plateauing. So when pricing in direction or volatility ahead, the disconnections between strong employment figures and patchy consumer activity shouldn’t be over-simplified. Expectation shifts – especially timed around policy speeches or inflation releases – are likely the more fertile environment for movement than headline growth figures alone.
Keep a close eye on sector differentials and the currency impact of tariff-related pressures. Those will feed through to hedging decisions, pricing models, and ultimately direction on volatility. Lock into the timing over the function – data surprises around consumer spending, not just jobs, could be more revealing if the Fed holds steady for longer.
Use that pattern. Look where price pressure and labour data diverge. And then, when employment holds but pricing power doesn’t, you’ll know where pressure is likely to break next.
