Bank of the West U.S. Outlook Report for June 26, 2015

US Outlook Report: Purchasing Manager Indexes Soften in June

Readings on business surveys from regional PMIs have been mixed in June, and the preliminary national level Markit PMIs for manufacturing and service businesses softened noticeably, implying a slowing in business activity as the second quarter draws to a close.

The biggest surprise was the slip in the Markit services PMI to 54.8 from 56.2 in May.  While still indicating expansion in the service sector in June, the measure came in well short of consensus expectations of an improvement to 56.5.  Indeed, the Markit services PMI has been sliding steadily since March, and peaked at a robust 61 way back in June of last year. With private service employment making up about 86% of total U.S. private employment and the bulk of our monthly job creation, the outlook and health of the U.S. services sector is more important than ever for divining our economic future.

Ending the quarter on a weak note, especially if that weakness involves the services sector, feels a bit disheartening, but it’s not necessarily a harbinger of trouble ahead.

To find out why, check out this week’s US Outlook Report.