US business activity surged in July, with Composite PMI jumping from 52.9 to 54.6, a 7-month high, driven by strength in services. PMI Services rose from 52.9 to 55.2, also a 7-month high. However, the manufacturing index dropped sharply from 52.9 to 49.5, slipping back into contraction for the first time this year.
S&P Global’s Chris Williamson noted the data signaled a sharp pickup in economic growth, with the survey pointing to a 2.3% annualized expansion in Q3, compared to 1.3% in Q2. But the rebound is uneven. Manufacturing is now dragging again, with the prior boost from tariff-related front-loading fading.
Business confidence weakened across both sectors, falling to one of the lowest levels in over two years. Tariff uncertainty and soft demand appear to be weighing heavily on forward-looking sentiment. Even in services, the outlook has dimmed despite the current strength in output.
Price pressures are also building. The survey highlighted one of the largest increases in selling prices in three years, with firms citing tariffs and rising labor costs as key drivers. This suggests upward pressure on consumer inflation will persist into the months ahead, keeping the Fed on edge despite soft spots in manufacturing.
