The service sector in the US posted a surprise increase in July boosting views that the US is not sliding into a recession.
According to data from the Institute for Supply Management this week, the ISM non-manufacturing purchasing managers’ index increased to 56.7 in July, growing from the 55.3 recorded in June. Last month’s ISM non-manufacturing purchasing managers’ index was far higher than market estimates for a reading of 53.5. It also marked an end to two successive months of contraction and the 26th consecutive month of readings above 50. A reading higher than 50 indicates an economy in expansion, whilst a reading below 50 indicates an economy in contraction.
Importantly, the new orders part of the survey showed an end to a two-month contraction streak. The ISM’s index for this metric rose to 59.9 in July, as businesses reported that they saw requests for fresh business and “moderate volume increases.” July’s New orders metric was up from the 55.6 recorded in June and ended two consecutive months of contraction.
Anthony Nieves, chair of the ISM Services Business Survey Committee, said in a statement:
“Growth continues — at a faster rate — for the services sector, which has expanded for all but two of the last 150 months. The slight increase in services sector growth was due to an increase in business activity and new orders.”
Brighter Outlook
Meanwhile, Michael Pearce, senior U.S. economist at Capital Economics in New York. said that the latest economic news points towards the immediate outlook looking a little brighter.
“The ISM activity is consistent with GDP growth of close to 2% annualized, rather than the outright declines seen over the first half of the year,”
“With borrowing costs down from their June peak, and falling gasoline prices likely to feed through to rising real disposable incomes, the immediate outlook for services is looking a little brighter.”
