The US services sector's expansion continued in July amid strong demand despite continued inflationary pressures, two surveys showed Wednesday.
The Institute for Supply Management's purchasing managers' index ticked up to 54.1 last month from 54 in June. The consensus was for a 54.5 print in a Bloomberg poll. A reading above 50 indicates the services sector economy is generally expanding.
The business activity index advanced to 59.1 from 55.4, while new orders increased to 57.2 from 55.1.
"Overall, the US services economy continues to be resilient," said Steve Miller, chair of the ISM's services business survey committee. "Concerns still exist regarding mortgage and inflation rates, and we are still in the midst of pricing impacts due to the recent run-up in petroleum costs."
The prices index rose 2.6 points sequentially to 70.3 in July, while the employment gauge fell into the contraction territory with a reading of 47.4, compared with 51.2 in June, marking its lowest level since March, the ISM survey showed.
"For the (Federal Reserve), the report argues for patience: growth is firm enough to avoid urgency on (monetary policy) easing, while price pressures remain too elevated to declare victory," TD Economics Senior Economist Vikram Rai said in a note.
Separately, S&P Global (SPGI) said its services PMI rose to 54.6 in July from 51.2 the month prior. That's the strongest growth in nine months as new work saw the steepest rise since November, according to the data provider.
Overall input cost inflation last month hit its highest level since May 2025 amid tariff- and energy-related price hikes. Albeit only "marginal," the job creation rate was the strongest for eight months. Firms' confidence in the outlook improved in July, with optimism reaching its highest level since November, according to the report.
However, S&P Global Market Intelligence Chief Business Economist Chris Williamson attributed the improvements to certain temporary factors and called for caution.
"Businesses benefited in early July from a tailwind of reduced geopolitical uncertainty and lower oil prices," Williamson said. "With hostilities in the Gulf escalating as the month progressed, the geopolitical environment is now likely once again acting more as a headwind to growth while exacerbating already elevated price pressures."
Earlier this week, two surveys showed that the US manufacturing sector continued to grow in July, with Institute for Supply Management data indicating the fastest expansion rate in more than four years and S&P signaling steady growth pace.
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