US services sector activity slows slightly in July, ISM says

Activity in US services slowed modestly last month, the results of a closely followed survey revealed.

The Institute for Supply Management's services sector Purchasing Managers' Index slipped from a reading of 53.9 for June to 52.7 in July.

Economists had penciled in a print of 53.0.

The details of the report were somewhat mixed.

On the positive side of things, the key sub-index for new orders only ticked lower from 55.5 to 55.0.

The sub-index for business activity did slip from 59.2 to 57.1.

That for employment fell from 53.1 to 50.7 and a gauge linked to inventories from 55.9 to 50.4.

A sub-index for the prices paid by companies increased from 54.1 to 56.8.

"As a result, although a weighted average of the ISM manufacturing and services prices paid indices ticked up last month, it still suggests core inflation could fall slightly below the Fed’s 2% target before long," said Andrew Hunter, deputy chief US economist at Capital Economics.

"Overall, the survey evidence remains consistent with fairly muted economic growth and continued sharp falls in inflation, suggesting there is little need for the Fed to raise its policy rate any further."

"This, in turn, is consistent with the broader picture of slower growth in consumers' spending, as excess savings accumulated during Covid dwindle and higher interest rates bite," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

"The restart of student loan repayments from October will deal an additional blow, and we remain braced for outright month-to-month declines in real consumers' spending."

-- More to follow --