U.S. Services Index Unexpectedly Rebounds From Two-Year Low In July

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A report released by the Institute for Supply Management on Wednesday showed an unexpected acceleration in the pace of growth in U.S. services sector activity in the month of July.

The ISM said its services PMI rose to 56.7 in July from 55.3 in June, with a reading above 50 indicating growth in the sector. The uptick came as a surprise to economists, who had expected the index to dip to 53.5.

The unexpected increase by the services PMI came after the index edged down to its lowest reading since May 2020 in the previous month.

"Growth continues — at a faster rate — for the services sector, which has expanded for all but two of the last 150 months," said Anthony Nieves, Chair of the ISM Services Business Survey Committee. "The slight increase in services sector growth was due to an increase in business activity and new orders."

The report showed the business activity index shot up to 59.9 in July from 56.1 in June, while the new orders index jumped to 59.9 from 55.6.

The employment index also rose to 49.1 in July from 47.4 in June, although the reading below 50 indicates employment in the services sector contracted for the second consecutive month.

On the inflation front, the ISM said the prices index decreased for the third consecutive month, tumbling to 72.3 in July from 80.1 in June.

The report also showed the inventories index fell to 45.0 in July from 47.5 in June, as services businesses continue to struggle to replenish inventories.

"Availability issues with overland trucking, a restricted labor pool, various material shortages and inflation continue to be impediments for the services sector," said Nieves.

The ISM released a separate report on Monday showing its manufacturing PMI edged down to 52.8 in July from 53.0 in June, hitting the lowest level since June 2020. Economists had expected the index to dip to 52.0.

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