U.S. Services Index Indicates Modestly Slower Growth In July

The Institute for Supply Management released a report on Thursday showing a modest slowdown in the pace of growth in U.S. service sector activity in the month of July.

The ISM said its services PMI slipped to 52.7 in July from 53.9 in June, although a reading above 50 still indicates growth. Economists had expected the index to edge down to 53.0.

The modest decrease by the headline index partly reflected a slowdown in the pace of growth in business activity, with the business activity index falling to 57.1 in July from 59.2 in June.

The employment index also slid to 50.7 in July from 53.1 in June, while the new orders index dipped to 55.0 in July from 55.5 in June.

Meanwhile, the report said the prices index climbed to 56.8 in July from 54.1 in June, indicating an acceleration in the pace of price growth.

“Solid income growth and the continued normalization of discretionary services spending are anticipated to keep the services sector growing through the end of Q3,” said Oren Klachkin, Lead US Economist at Oxford Economics.

“Conditions should change around the end of the year when we expect tighter lending standards, elevated interest rates, and weaker incomes to take the wind out of the sails of the services sector,” he added. “How services fare over the coming months will dictate whether the looming recession, which we expect to start in Q4, will be mild or severe.”

A separate report released by the Institute for Supply Management on Tuesday showed U.S. manufacturing activity contracted for the ninth consecutive month in July.

The ISM said its manufacturing PMI crept up to 46.4 in July from 46.0 in June, but a reading below 50 continues to indicate contraction. Economists had expected the index to inch up to 46.8.

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