Services Sector Bounces Back for July

The services sector bounced back in July, according to an Institute for Supply Management (ISM) report released today. After slumping significantly in June to a reading of 52.2, the index headed past analysts' 53.0 expectations to hit the 56.0 market for July.

An above-50 rating signals overall expansion, and the services sector has managed to increase its economic activity for 43 consecutive months. The report also indicates that U.S. service firms expanded in July at the fastest pace since February. The index is composed of 10 components, with six expanding for July.

ISM Non-Manufacturing Index Chart

ISM Non-Manufacturing Index data by YCharts.

Business activity/production made the largest gains, up 8.7 points to reach 60.4. Prices headed 7.6 points higher to 60.1, while new orders' new 6.9-point jump to 57.7 paints a positive picture for the sector's future expectations.

But even as production and new orders made significant improvements, the index's employment component decreased 1.5 points to 53.2, hinting that corporations aren't convinced about their bright future. Maybe that's because order backlogs contracted for July, dropping 5.5 points to 46.5.

Today's report follows on the heels of last week's announcement that the unemployment rate dropped to 7.4% in July, with major employment gains coming from the services sector.

-- Material from The Associated Press was used in this report.


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