Services economy still growing for June, but so were prices.

It seems like the overall US economy was OK as the first half of 2026 ended. The Institute for Supply Management says that services were growing at a decent clip in June, with new orders still being added, and even employment was reported to be up after 3 months of declines.

“Economic activity in the services sector continued to expand in June, say the nation’s purchasing and supply executives in the latest ISM® Services PMI® Report. The Services PMI® registered 54 percent, the 24th consecutive month in expansion territory.

The report was issued today by Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee: In June, the Services PMI® registered 54 percent, a decrease of 0.5 percentage point compared to May’s figure of 54.5 percent. The Business Activity Index remained in expansion territory in June, decreasing 2.3 percentage points to 55.4 percent from May’s reading of 57.7 percent. The New Orders Index registered 55.1 percent, 2.2 percentage points below May’s figure of 57.3 percent. The Employment Index expanded for the first time in four months with a reading of 51.2 percent, a 3.3-percentage point increase from the 47.9 percent recorded in May. All of the four subindexes that make up the composite PMI® were above their 12-month moving averages,” says Miller.

“The Supplier Deliveries Index registered 54.4 percent, 0.8 percentage point lower than the 55.2 percent recorded in May. This is the 19th consecutive month that the index has been in expansion territory, indicating slower supplier delivery performance. (Supplier Deliveries is the only ISM® PMI® Reports index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.)

But check out this segment of the ISM report, where they ask the managers about what’s happening with prices in these industries.

And I noticed this comment from someone in Accomodation and Food Services.

“We continue to experience higher prices due to the Persian Gulf conflict through rising diesel fuel costs and increased input costs for resin-based packaging. The brunt of the impact will be experienced in the third quarter (Q3) of 2026, but we are feeling the impact now. Suppliers are aggressively attempting to pass through price increases.”

Then there’s this comment from someone in Wholesale Tade.

“We are experiencing continued sequential top-line growth driven mostly by increased prices.”

Which means they’ve been able to pass higher prices onto the stores, and the stores are likely passing it on to their customers.

So don’t count on consumers getting a price break on anything beyond what we’ve seen at the pump in the last month – and even with the recent declines, we’re still paying 20% more for regular gasoline than we were this time last year. And since we aren’t seeing major job cutbacks with the higher prices, there is no reason for the Federal Reserve to cut interest rates any time soon – if anything, they should be raising them.

Oh, and now Trump says war is back ON in Iran, oil futures are up 9% in the last 2 days and and probably headed higher than that. So don't expect inflation to be coming down any time soon, and in an honest world, rate hikes from the Fed are seeming more likely than not for this year.

That doesn't seem like a winning situation at all for the second half of 2026, does it?