The Institute for Supply Management's July Non-Manufacutring
Index reading was better-than-expected, reaching 52.6 versus a 52
estimate from surveyed economists. New orders, considered a leading
indicator for future reports, rose in July. However, a rise in
inventories signaled that growth may remain tepid in the coming
The headline beat in the index was masked by mixed internal
results. The composite index is made of 10 sub-indexes, and each of
these can tell a different story of the economy. New orders rose to
54.3 from 53.3 in July, signaling that output in August could climb
from current levels in the large service sector. Contrastingly, a
rise in inventories from 53.0 to 54.5 could offset future gains, as
production gets quelled when companies sell inventories before
making new products.
Following the headline beat of the
Non-Farm Payrolls report
, the employment sub-index of the ISM report showed weakness in the
service sector. The employment sub-index fell to 49.3 from 52.3 in
June, a huge drop, signaling that service sector employment may not
have been as strong as the Bureau of Labor Statistics reported.
Lastly, imports fell off of the proverbial cliff, declining an
astounding 9 percentage points in July to 44.5 from 53.5 in
Recent economic data released in the U.S. likely pointed to a
continued period of slow growth, but not an imminent recession.
Contrasting internal sub-indexes continue to paint a mixed picture
of the economy. Markets continued to climb on the data, with U.S.
stock indexes climbing to intraday highs. Future data may be needed
to confirm if the economy nearing a bottom or if further downside
will come following the summer months.
Friday's reports of continued slow growth in the U.S. service
sector followed similar indicators from Europe and China.
Overnight, China reported that its service sector continued to
expand in July, albeit at a slower pace than in June. The Asian
nation's non-manufacturing PMI fell to 55.6 in July from 56.7 in
June. Also, in Europe, the Eurozone-wide services PMI rose to 47.9
in July from 47.6 in June on expectations of a flat, 47.6 reading.
Strength in Germany, France, and Spain were off-set by weakness in
Italy and England, though England is not included in the Eurozone
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