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The numbers: A measure of business conditions for service sector companies like hotels, restaurants and hair salons slowed in July, but still signaled an expanding economy.
The service-sector index fell to 52.7% from 53.9% in the prior month.
That was a larger drop than economists predicted. Economists forecast the Institute for Supply Management’s survey to slow to 53.3%.
The index has been in expansionary territory for seven months in a row, however. Numbers above 50% indicate growth.
“I think we’re on solid footing right now. It’s just hard to see what might happen down the road,” said Anthony Nieves, chairman of the survey.
Key details:
- The index of new orders dipped to 55.0% from 55.5%. “Sales have been steady,” a senior construction executive told ISM.
- The production gauge fell 2.1 points to 57.1%
- The employment barometer dropped 2.4 points to 50.7%
- The prices-paid index, a measure of inflation, grew to 56.8% from 54.1% the prior month. “Supplier costs (are) not coming down as much as expected,” a wholesale trade executive told ISM.
Big picture: Demand for services has been strong in the aftermath of the pandemic. People’s desire to travel and go to restaurants has been a balancing force while the industrial side of the economy remains stuck.
Looking ahead: “Even though the risks of a recession may be easing, that doesn’t mean the economy is set to enjoy a strong performance over the second half of the year,” said Andrew Hunter, deputy chief U.S. economist at Capital Economics.
Market reaction: The Dow Jones Industrial Average
DJIA
and S&P 500
SPX
fell slightly in Thursday trades.
