The US economy is sending two very different signals at once. Manufacturing is humming along at its fastest pace in four years. Services, which accounts for the larger share of economic activity, is barely moving.

S&P Global’s flash PMI data for June, released on June 23, puts manufacturing at 55.1 and services at 50.7. Both figures sit above 50, which is the threshold separating expansion from contraction, but the gap between them tells a story worth paying attention to.

What the numbers actually mean

Think of a PMI reading like a company’s quarterly mood survey. Every month, purchasing managers across hundreds of firms answer questions about new orders, employment, supplier deliveries, inventories, and prices. The responses get compiled into a single number.

Above 50 means conditions improved. Below 50 means they deteriorated. At 55.1, manufacturing isn’t just expanding, it’s doing so with noticeable momentum.

The June manufacturing reading of 55.1 matches May’s final figure, making this the highest level of factory activity since May 2022. In English: US manufacturers are operating at a clip not seen in over four years.

The services reading of 50.7 tells a quieter story. Services firms are technically growing, but 50.7 is close enough to flat that you wouldn’t want to throw a party over it. The figure matches May’s revised final reading, so at least there’s no deterioration.

Geopolitics, supply chains, and the cost of uncertainty

Ongoing conflict in the Middle East has been doing what geopolitical disruption usually does to global supply chains: it creates stockpiling behavior, pushes input prices higher, and weighs on export-oriented manufacturers who need predictable shipping routes.

Somewhat counterintuitively, stockpiling can inflate manufacturing PMI readings in the short term. When companies rush to build inventory buffers ahead of anticipated disruptions, purchasing activity spikes, and that activity shows up as expansion in the index. It’s growth, technically, but the kind driven by anxiety rather than organic demand.

Rising input prices are the other side of that coin. Manufacturers are paying more for raw materials, and that cost pressure eventually has to go somewhere, either into margins or into the prices consumers pay downstream.

What this means for Fed policy and risk assets

A manufacturing PMI at 55.1 signals that at least one major sector of the economy has enough momentum to absorb tighter financial conditions. That doesn’t make rate cuts more likely, it arguably makes them less urgent.

The services softness complicates that picture. Services employment and consumer spending are the two variables that Fed officials watch most closely when assessing whether the economy can handle elevated rates. A services PMI barely above stagnation introduces doubt.

For crypto markets specifically, the relationship with macro data like PMI is real but indirect. A mixed PMI print, manufacturing strong and services soft, doesn’t give either bulls or bears a decisive edge.

Services represents the majority of US GDP and employment. Until 50.7 starts moving meaningfully toward 53 or 54, the overall picture remains one of uneven expansion rather than synchronized growth.