US services sector growth retreats slightly in July

US SERVICES sector activity expanded at a slower clip in July with growth in new orders and employment decreasing, survey data showed on Thursday (Aug 3), adding to signs the economy is cooling.

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 per cent 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 per cent, while the new orders index dipped 0.5-point to 55 per cent.

“We are maintaining a cautious approach, although inflation seems to be easing,” said a survey respondent.

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US manufacturing shows signs of stabilising at lower levels in July, ISM says

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“The overall business environment has stabilised, but tight labour 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. AFP