US services sector expanded in July, jobs grew: Survey

Market: Metals, Natural gas
05/08/24

A measure of US services sector activity grew in July, showing the largest part of the economy expanded last month even as manufacturing contracted.

The services purchasing managers index (PMI) rose to 51.4 in July from 48.8 in June, the Institute for Supply Management (ISM) said today. Readings above 50 signal expansion while those under that threshold signal contraction. Services, which account for more than two thirds of the economy, have contracted twice in the last four months, but only three times since early in the Covid-19 pandemic.

The report, showing the largest part of the US economy has continued to expand, follows a report on 2 August from the Labor Department that showed only 114,000 jobs were generated in July, much fewer than expected, which sparked a sharp selloff in global stocks, oil and other commodities amid concerns of possible recession. Also last week, the Federal Reserve kept its target rate unchanged, but signaled a cut was likely in September.

The business activity/production index in today's report registered 54.5 in July, compared with the 49.6 recorded in June. The new orders index expanded to 52.4 in July, from 47.3 the prior month. The employment index expanded for just a second time in 2024, rising to 51.1 in July from 46.1 the prior month. The report appeared to counter some of the concerns stemming from the July employment report.

The prices index rose to 57 from 56.3.

"Survey respondents again reported that increased costs are impacting their businesses, with generally positive commentary on business activity being flat or expanding gradually," ISM said. "Comments continued to express a wait-and-see attitude regarding the upcoming presidential election."

The ISM services report today follows an ISM report last week showing manufacturing PMI for July fell to 46.6, the deepest contraction in manufacturing since last November, from 48.5 in June. It was the 20th contraction in 21 months.

By Bob Willis

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