ISM PMI June Report Explained: Manufacturing & Services Data Show Economic Expansion in 2026

[00:00:00] Speaker 1: Welcome to Manufacturing Talk Radio, your everything manufacturing podcast, with host and veteran manufacturing industry expert, Louis Weiss, and co-host Amy Niklas. Make sure to check out our catalog of 800 previous shows on YouTube, Spotify, or wherever you're listening. Now, let's get into the episode. [00:00:30] Speaker 2: Good day, everyone. This is Lou Weiss and Amy Niklas of Manufacturing Talk Radio. We're here for our monthly show with Steve Miller, who is the chair of the Institute for Supply Management Services Business Survey Committee report. It's a good thing you don't have to wear that on the back of a football jersey. No kidding. You'd have to have your arms like this. So, Steve, did a good job. We got a solid expansion, 54, for the June 2026 report. Give us the breakdown. [00:01:13] Speaker 3: Yeah, it was great to see. For the third time in 2026, we had all four sub-indexes that make up the PMI. Those are all above 50, plus all above their 12-month average. So, really solid numbers. Those are business activity, new orders, supplier deliveries, and employment. And so, the big change was employment up more than three points, up to 51. So, above where we've been for several months. So, really good sign. The other sign is that we saw a little bit of a drop in the prices index as well. So, down to 67.7, which is the first time out of 70 in several months as well. So, good sign. A lot of commentary around people starting to see gas, fuel, and diesel prices going down, although some are still seeing them elevated. So, good mix there, showing a transition down to lower pricing from a petroleum input type of thing. Petroleum products, though, we see are still elevated. So, second month in a row that they came through as up in price. The one thing that was a little bit concerning was the increase in the number of items that look like they're – or that all are data center inputs are short supply. So, wonder if that will be a little bit of a – a little bit of dampener in the growth of data center construction and maybe growth of AI, but we'll see. It's only – it's only – [00:03:00] Speaker 4: I think that was the same for the manufacturing report as well. Yeah. Yeah. Yeah. [00:03:07] Speaker 2: I noticed, and I go back a minute, the pricing. It's the 109th month of expansion, so is that never going down? [00:03:21] Speaker 3: I mean, it's nine years. We call that a depression. When prices go down, deflation is usually – usually doesn't accompany any positive economic activity. [00:03:33] Speaker 2: So, we should be rooting for higher prices? [00:03:36] Speaker 3: Slightly higher prices. [00:03:39] Speaker 2: Okay. Okay. Sounds good. [00:03:41] Speaker 4: Would you just like me to share the actual chart from the report? Would that be helpful? Sure. Okay. Great. Yeah. I just thought maybe that would help for our viewers. [00:03:56] Speaker 2: There we go. Yeah. Very good. Wow. How about it, Steve? [00:04:01] Speaker 3: Yeah. So, you see – when you look down that third column of percent – so, the geography of the report. Services PMI numbers are on the left, and then the final three columns are the manufacturing PMI as a reference point. So, you can see for similar indexes how they compare. The services is about 90% of the U.S. economy and manufacturing about 10%. But if you're not making stuff, you don't need a lot of the services. So, it has an outsized impact, even though it's only 10% of GDP. When you look at the numbers that kind of stand out, if you look at that percent point change column on the services PMI data, you see 3.3% – or percentage points – up for employment. And you see 11.3% down on inventories. And then, next one up, 3.6 percentage point increase in backlog of orders. So, wonder if that backlog of orders is just what's driving that employment increase, where, you know, we're seeing we're not able to keep up with the new orders, so we need to hire people, which is what it looks like in general. But, we'll continue to watch that, and that'll be a continued positive sign. On the inventories number, it's important – actually, all the numbers – it's important to understand it's a diffusion index. So, it's looking at the number of companies reporting that they're up or down, and if more are reporting up than are reporting down, we're above 50, and depending on their weighting for GDP. But, if you're at 50, you go down from 52 to 50, or in this case, from 62 to 51, it doesn't mean you're going down. It means that less people are saying they're going up. So, 50 is flat, on average. So, that's one thing that, when you listen to news reports, they seem to get wrong, often. That a down number doesn't mean we're shrinking, it just means we're growing slower, if it's above 50. [00:06:21] Speaker ?: Okay. [00:06:22] Speaker 4: Yeah. Okay. Okay. I think that makes a lot of sense. I like slower than shrinking. That sounds better to me, anyway. We're going to keep – I'm glad to hear that. [00:06:34] Speaker 2: The overall report is clear that we're still in the growing and expanding aspect of the economy. Yes. Even though it's reporting that inventory sentiments are too high. [00:06:53] Speaker 3: Yes, but when you look at inventory sentiment over time, which I just happen to be able to do here, inventory sentiment at 52.6, saying we have too much inventory, is the lowest number we've had in at least two years. [00:07:14] Speaker ?: Oh, so that's not terrible. That's not terrible. [00:07:16] Speaker 3: No. Okay. [00:07:18] Speaker 2: I always maintained looking at your report, and certainly I'm not an expert, but anything between 47 and 53 is always like the no man's land. It's like, maybe we're not sure what we're talking about. [00:07:38] Speaker 3: I might make it a little bit tighter than that, Lou, but I think you're right. You bounce around the 50, you know, if you're 48.7, is it that much different than 51.1? Yeah. [00:07:49] Speaker 2: I mean, this is not a science. This is the best guess. [00:07:53] Speaker 3: Right. Right. When you see inflections, you see something go from negative to positive by 8% or something like that. For me, that's the kind of thing that makes me. That's crisis. Yeah. [00:08:05] Speaker 2: So let's talk about some of the respondent comments. Okay. Which I always find to be interesting and giving maybe even a better or additional insight to what the numbers really mean. [00:08:22] Speaker 4: I find them incredibly helpful as, you know, the layman, if you will, or the, you know, the everyday consumer who's kind of looking and checking it out to get an idea of really what's happening and taking your information as well and what that response is. I mean, I did notice that, you know, the droughts in Virginia are causing, you know, a big problem. That's not something that I would have necessarily equated to this, you know, the entire impact on the report itself. So I thought that was very interesting. Yeah. [00:08:51] Speaker 3: So I try and do two things with the quotes. Could we get hundreds of comments each month on various different aspects? Some indexes, some overall what's up and what's down or in short supply, that type of thing. And what I try and do with the respondents is if we're seeing something that's a trend that lots of people are talking about, I try and make sure that we have some of those in there. And then if there's some outliers as well that are in like the one you just brought up around Virginia, that was if you look at what's happening, you go, well, this is pretty significant. But it was only came through in one comment. [00:09:32] Speaker 4: Okay. But it was like, oh, wow, that really makes a lot of sense. I could see why that would be a big impact and not something I had really anticipated being in the report. So I thought those were great. [00:09:42] Speaker 3: And then when you look at when you look at the industries and what's happening with the industries, you'll see that agriculture is the bottom on the overall PMI. So they're the fastest, fastest contracting inventory or sorry, inventory item industry in the survey. [00:10:04] Speaker 4: Okay. That makes a lot of sense. [00:10:06] Speaker 3: I try to get those together so that people can see those. Um, we saw less overall in the commentary this month around, uh, around the war and gas prices, fuel prices. Um, but there still were some, um, and then we still see, um, tariff commentary commentary coming through in terms of a cause, uh, for increased prices month over month. [00:10:31] Speaker 4: Okay. So, and what. [00:10:33] Speaker 2: I got gas this morning, $3 and 59 cents. That's about a dollar cheaper than it was a month or two ago. [00:10:42] Speaker 3: Yeah. Yeah. We've seen a 30% drop at end of June. Um, crude prices got below 70 again, uh, for their first time since February. And, um, and then, you know, who knows, who knows where we go from here. Hopefully, hopefully we can, we get into the mid fifties back where it was at its low, uh, over the last several years. [00:11:05] Speaker ?: Okay. [00:11:06] Speaker 3: Amy. [00:11:07] Speaker 4: I don't need to get gas cause I have an electric car. So I only, I keep track of it through, through these reports and through Lou. I'll bet you have a Tesla. [00:11:18] Speaker 2: I do. I do. [00:11:20] Speaker 4: I do. But it's, you know, I mean, the parts for those might be a problem, but you know, the mechanical, or not, I guess not mechanical, electrical parts might be a problem for those. But. Yeah. [00:11:32] Speaker 2: Yeah. What, what comments, uh, from your responders shows certain concerns? Yeah. [00:11:38] Speaker 3: So the, the, um, um, uh, semiconductors, uh, memory supply, um, those are, those are two that come through and then, um, and then prices paid for, um, for petroleum related products. Uh, we saw that for the second time or a second month in a row in the commodities up in price. But then we also saw it in the commentary resins in particular. Uh, one of the respondents was buying a head, a head for resins before they saw the full impact, uh, from oil prices that went up in March. [00:12:12] Speaker 4: I think it's important to know. And I actually, you know, I don't know if you've seen the show land, man, um, I'm waiting for the next season, but one of the. Points that they make in this show is that what most people don't realize is that petroleum is in. Everything. Like it's in your chapstick. It is. I mean, really when petroleum, when you see petroleum down, it's across. It's almost in anything that you have. And I didn't realize that. And I don't think that most consumers realize that petroleum is not just what we're not just talking about like gas. [00:12:46] Speaker 3: Yeah, I think one of the other things that's out there, that's a little bit, um, certainly something that I wasn't familiar with until I talked to a friend of mine. Who's, uh, who was a CPO at a fertilizer company, um, is that the Ukraine war has had a, has had a huge impact in availability and cost of fertilizer. Um, so you look in the agricultural industry and you'll see that in the commentary as well. Um, costs for inputs, uh, for dairy and for some egg, uh, are above their prices that they can sell for. Uh, and one of the, one of the, um, contributors to that is either, um, use of fertilizer availability for fertilizer to produce feedstock. Um, and then fertilizer just to produce, you know, to help produce food. [00:13:37] Speaker 4: It's crazy how it really all. It's so much bigger than just like that one thing. Yeah. [00:13:43] Speaker 2: Yeah. It seems as though that the utility industry is continuing to have issues in terms of supply and shortages and price and so on. Does that look like it's going to continue? [00:13:58] Speaker 3: It's somehow they're seeming to get past it. Um, because there's still, their growth is still fantastic. Um, but, uh, that does it transformers, um, uh, high voltage switches. Uh, and then, then when you go into basic materials like aluminum and copper, uh, we've seen that on an ongoing basis, either up in, in price or short supply. Um, I think some of the, uh, piping was an issue last month as well from a short supply standpoint. It didn't come through in the, um, for the commodities that we list either up in price, down in price. We look for some consistency across multiple companies, not just one company mentioning it, but in the commentary, we had one talking about that impacting utility build outs, utility or data center build outs and utility. [00:14:53] Speaker 2: The way it is, and we are now in the deep part of the summer, is this going to continue in the positive trend that it seems to be? [00:15:04] Speaker 3: Um, in our, our mid year from last month, um, we were projecting, um, good growth for the rest of the year and moderated pricing increases. Uh, where we had seen, uh, about, I believe it was a 7.4% increase year to date on prices paid. We're projecting 1.2% for the rest of the year as a supply management community, um, with continued growth, continued capital investment. Um, so all, all really good signs in the mid year. And then this month's, uh, PMI information looks like it, it, uh, supports that. [00:15:41] Speaker 2: By the way, uh, for the audience, um, last week or two weeks ago, we did the ISM semi-annual, uh, forecast, uh, with Steve and Susan Spence, uh, to be, that were on our show. And it, it, it's all, you know, an hour of great discussion and great talk about the futures. And it looks as though that the going forward six months is going to be great. And here this month is only supporting that. So if you're interested in hearing what's going on in regards to the future six months or to, through the end of the year, listen to last week's, uh, uh, show that we did. [00:16:25] Speaker 3: So Lou, what I really liked about, liked about doing that is that, um, Sue's background is heavy manufacturing and some services. Mine's heavy services and some manufacturing. So the ability to, to, um, be able to answer your questions thoughtfully, uh, and you have great questions. I think, um, that made it really fun last month. [00:16:46] Speaker ?: Oh, great. [00:16:46] Speaker 2: Great. Well, there was a quarter of a million, a quarter of a million people that watched it. So it must've done something. [00:16:55] Speaker ?: Yeah. [00:16:55] Speaker 2: We're not CNN or MSN now or whatever, but we have a strong audience that tunes into the ISM report. So I, I thank you and, uh, Susan tour being on our show as regulars and you have been since November 4th, 2013. And our 13th year is coming up this coming November 13. I haven't done many things for 13 years. Well, my marriage is yes, but, uh, yes, beyond that. So, uh, it looks as though things are going to be continuing, uh, going in that direction based on this report and also the semi-annual forecast. So that's all, you know, really great stuff. Unless as economists say something major changes. Now, the only major change I see potentially is the end of the war. So let's, uh, let's forecast on our own a little bit. What happens if the war ends the day after tomorrow? I'm putting you on the spot, Steve. Yeah. [00:18:06] Speaker 3: Two, two things. Um, demand for transportation drops and fuel prices drop faster than they would already. Those are, those are the two things that I think would be, you know, measurable. Um, and maybe a minor impact in the wholesale trade. [00:18:29] Speaker 2: If I'm not mistaken, um, the fuel pricing are not in the mix of inflation numbers. Am I correct? [00:18:38] Speaker 3: Uh, it depends which one you look at. It is, it is included in our pricing numbers. [00:18:43] Speaker 2: Oh, okay. So if prices dropped another 50 cents a gallon, uh, inflation is also going to drop. Correct. [00:18:52] Speaker 3: Um, from your mouth to God's ears. We'll see. You know, when, when interest rates got cut, mortgage rates went up. Yeah. No, that's sometime. [00:19:03] Speaker 2: Some of that is called opportunistic pricing. Yeah. [00:19:06] Speaker 3: Sometimes nature. [00:19:07] Speaker 2: Or gouging in some circles. Yeah. [00:19:10] Speaker ?: Yeah. [00:19:12] Speaker 3: Lou something about the, um, the ability to sustain, uh, growth though. Um, we're, I was looking at the numbers since, um, since January. So 20, 26 numbers for the PMI. We haven't seen a six month run like that, um, since the second half of 22. July through December, 2022 was the last time we saw a six month average above where we are right now for the six month. That's impressive. [00:19:45] Speaker 2: Yeah. [00:19:46] Speaker 3: Yeah. It seems like a really good sign. [00:19:49] Speaker 2: Uh, very good. Very good. Um, I'm looking forward to talking more about it as the months go by. Uh, I wish to, uh, thank you, Steve, for your analysis. And your report, uh, Amy, do you have any final comments or words? [00:20:07] Speaker 4: No, I mean, I think I just asked you the same thing. I, I asked you almost every time was that, um, obviously we're seeing a great uptick. And as a consumer, if I'm looking at the report, what would you, what would you say that we should take it as it means for us as the consumer, not just as the, uh, you know, person that's within the supply chain. [00:20:28] Speaker 3: Uh, for those of us that, um, that, you know, are, are early in our careers that are looking for, you know, future growth and growth potential service industry looks like it's a great place to be starting to see employment number come back. And it seems to be because we've had sustained business activity and new order growth, seeing the backlog grow a little bit. It looks like we're in, we're in for a good run. Uh, so, you know, now's the time. I think if you're looking for your next gig, um, you know, or looking to contribute more where you are, uh, it looks like in services industries is a great place to be. That's great feedback. [00:21:06] Speaker 4: I love that. That's a great way to close this out. [00:21:10] Speaker 2: So there's a very strong place to be. If you're starting out in your career, uh, you may get your hands dirty, but you may be earning six figure incomes. [00:21:23] Speaker 3: Oh, and you learn like crazy when you're seeing how things, everything supply chain, your supply chain, aficionado, seeing how it really works is really great. [00:21:32] Speaker 2: I'm trying to talk my godson into going into underwater welding. You get to, you get to go swimming every day and make $150,000 a year. [00:21:44] Speaker 3: Yeah. Make sure he stays in cold weather. Sharks are coming. Sharks are coming north. [00:21:49] Speaker 2: That's right. Well, I wish to, uh, again, thank you, Steve and a great report. Keep up the good work. Uh, and we're going to see you next month. Uh, any parting, parting words to you? Uh, stay cool. If you're on the East coast. [00:22:05] Speaker ?: Yeah. [00:22:06] Speaker 2: You know what I, you know, it's interesting for the last four, this is now July five. This is now the fifth day in New Jersey that they've been predicting four to five inches of rain. And it hasn't happened yet. So that's the good news. [00:22:23] Speaker 3: But a lot of people watched, a lot of people watched the show. That's right. [00:22:27] Speaker 2: That's right. Cause they're, they don't want to be out in the maybe rain. That's right. Everybody's keep listening to us. If you liked the show, hit the like button. We really appreciate that. And, uh, we'll see you next time. Definitely subscribe. [00:22:40] Speaker 4: Thanks again for joining us on another episode of manufacturing talk radio. [00:22:44] Speaker ?: Thanks again for joining us on another episode of manufacturing talk radio. With hosts, Lewis Weiss and Amy Nick Ross. Before you head out, make sure to subscribe and leave us a review. For more information about the show and the manufacturing industry, head over to MFG talk radio.com. That's MFG T. A. L. K. R. A. D. I. O. dot com. That's MFG T. A. L. K. R. A. D. I. O. dot com. That's MFG T. A. L. K. R. A. D. I. O. dot com. That's MFG T. A. L. K. R. A. D. I. O. dot com. [00:22:58] Speaker 1: That's MFG T. A. L. K. R. A. D. I. O. dot com. [00:23:27] Speaker ?: you