WASHINGTON — U.S. services sector activity expanded for a 25th consecutive month in July, supported by stronger new orders, although hiring weakened and businesses continued to face elevated cost pressures, according to data released by the Institute for Supply Management (ISM).
The ISM Services Purchasing Managers Index (PMI) edged up to 54.1 in July from 54.0 in June. A reading above 50 indicates expansion in the services sector, which accounts for more than two-thirds of U.S. economic activity. The result fell slightly short of economists' expectations but remained consistent with steady growth.
The survey showed that the New Orders Index rose to 57.2, signaling continued demand for services, while the Business Activity Index remained in expansion territory. However, the Employment Index slipped back below the 50 threshold after returning to growth in June, indicating that service-sector hiring contracted in July.
The Prices Index remained above 70 for the fourth time in five months, suggesting businesses continued to experience significant input-cost inflation despite some easing in supply-chain concerns. Supplier deliveries also remained slower than normal, reflecting ongoing logistical challenges.
Steve Miller, chair of the ISM Services Business Survey Committee, said comments from survey respondents referenced tariffs and conflict in the Middle East less frequently than in previous months, although cost pressures remained evident across many industries.
According to ISM, 13 of the 18 industries covered by the survey reported growth in July, reflecting broad-based expansion across the sector. Respondents continued to report healthy customer demand, though some businesses indicated they were limiting hiring amid higher operating costs and uncertainty over future expenses.
The latest report follows manufacturing data earlier in the week that also pointed to continued expansion in factory activity, reinforcing signs that the U.S. economy maintained momentum at the start of the third quarter despite persistent inflationary pressures. Investors and policymakers continue to monitor business surveys for indications of how higher costs, trade policies and geopolitical developments may influence growth and labor-market conditions in the months ahead.
The ISM services survey is closely watched by financial markets and the Federal Reserve as a gauge of business conditions, employment and inflation trends across the largest segment of the U.S. economy. July's reading indicated that services activity remained resilient even as businesses continued to navigate elevated prices and a softer pace of hiring.
