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US services sector activity expanded at a slower clip in July with growth in new orders and employment decreasing, survey data showed Thursday, adding to signs the economy is cooling. bulletin news
While the rate-sensitive manufacturing sector has slumped since the US central bank rapidly lifted interest rates over the past year to tackle stubborn inflation, the services sector has shown resilience.
The Institute for Supply Management (ISM) services index ticked down to 52.7 percent in July, weakening from June but still comfortably above the 50-point mark indicating growth in the key sector.
“This is due mostly to the decrease in the rate of growth for business activity, new orders and employment, as well as ongoing faster delivery times,” said ISM survey chair Anthony Nieves.
The business activity index edged down 2.1 percentage points to 57.1 percent, while the new orders index dipped 0.5-point to 55 percent.
“We are maintaining a cautious approach, although inflation seems to be easing,” said a survey respondent.
“The overall business environment has stabilized, but tight labor markets are creating ongoing issues,” the respondent added.
On Thursday, a separate report showed that jobless claims continued to trend lower over a four-week average, with businesses reluctant to cut their workforce after difficulties of hiring and retaining staff during the pandemic.
For now, lower inflation figures could be a sign that the US economy can achieve a “soft landing” where price increases come under control without a massive recession, said Thomas Barkin, president of the Federal Reserve Bank of Richmond, in a speech on Thursday.
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