The July U.S. services purchasing managers’ index (PMI) conducted by S&P Global came in at 55.0, just below the forecast of 56.0. The latest reading keeps the index in expansion territory for the 18th straight month.
From the latest press release, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said:
“The PMI surveys bring encouraging news of a welcome combination of solid economic growth and cooler selling price inflation in July.
“Another strong expansion of business activity in the service sector, which over the past two months has enjoyed its best growth spell for over two years, contrasts with the deteriorating picture seen in the manufacturing sector, where output came close to stalling in July.
“While manufacturers are reporting reduced demand for goods, this in part reflects a further switching of spending from consumers towards services such as travel and recreation. However, healthcare and financial services are also reporting buoyant growth, fueling a wide divergence between the manufacturing and service economies.
“Thanks to the relatively larger size of the service sector, the July PMI surveys are indicative of the economy continuing to grow at the start of the third quarter at a rate comparable to GDP rising at a solid annualized 2.2% pace.
“A further cooling of selling price inflation in the service sector meanwhile brings encouraging news for the Fed. Combined with a near-stalling of price increases in the manufacturing sector, the latest survey data point to average prices charged for goods and services rising at a rate which is indicative of consumer price inflation moving closer to the 2% target. However, the surveys saw some upward pressures on costs, especially in the service sector, which policymakers will likely be eager to see soften before being confident of inflation falling sustainably to target.”
Here is a snapshot of the series since mid-2012.
Here is an overlay with the equivalent PMI survey conducted by the Institute for Supply Management, which it refers to as “non-manufacturing” (see our full article on this series here). Over its history, the ISM metric has been significantly the more volatile of the two.
The next chart uses a three-month moving average of the two rather volatile series to facilitate our understanding of the current trend.
Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.
