U.S. ISM Services PMI fell from 50.8 to 50.1, below consensus of 51.5. Business activity declined from 54.2 to 52.6, while new orders dropped from 54.2 to 50.3. Notably, new export orders fell sharply from 51.1 to 47.9, marking the fourth contraction so far this year. The employment index also weakened further, down to 46.4 from 47.2.
The only upside surprise came from the Prices Paid index, which jumped from 67.5 to 69.9 — the highest reading since October 2022. The inflation gauge has now stayed above 60 for eight consecutive months, signaling persistent pricing pressure across the services economy.
According to ISM, the faster expansion in prices alongside continued employment weakness is a “worrisome development,” even as the overall index barely remains in expansion territory. The July reading corresponds to a meager 0.5% annualized GDP growth.
