Growth at Services Cools From a Seven-Month High

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Scott Eells/Bloomberg News

Growth at U.S. service providers cooled in July after reaching a seven-month high, consistent with more measured progress in the economy.

The 55.5 reading in the Institute for Supply Management’s non-manufacturing index followed 56.5 the prior month, the Tempe, Arizona-based group’s report showed Aug. 3. Readings above 50 signal expansion. The median forecast of economists surveyed by Bloomberg News called for 55.9.

Orders to the service producers that make up about 90% of the economy rose to a nine-month high, pointing to further economic growth as manufacturing stabilizes. A healthy job market, higher property and stock prices, and low borrowing costs represent a favorable backdrop for consumer spending coming off its best quarter since 2014.

“The rise in new orders is a sign the underlying picture is picking up,” said David Sloan, senior economist at 4cast Inc. in New York, who correctly forecast the index. “We can hope for stronger growth in the third quarter.”



The group’s non-manufacturing survey covers an array of industries including utilities, retailing, and health care, and also factors in construction and agriculture. Fifteen of the 18 industries in the survey reported growth in July, led by entertainment and recreation, accommodation and food services, and real estate.

“There’s a sense of stability” considering everything that’s going on in the global economy, Anthony Nieves, chairman of the ISM non-manufacturing survey, said on a conference call with reporters. Survey respondents “see the course being maintained for continued growth.”

Bloomberg survey estimates for the services index ranged from 54.3 to 57.

ISM’s new orders measure advanced to 60.3, the strongest since October, from 59.9. About 35% of purchasing managers surveyed said demand was higher in July, the biggest share in three months. The business activity index, which parallels the ISM factory production gauge, was little changed at 59.3 from the prior month’s 59.5.

The index of non-manufacturing employment decreased to 51.4 from 52.7 the prior month. Another report on Aug. 3 showed companies took on 179,000 workers in July, consistent with steady employment growth across the United States, according to ADP Research Institute.

The gauge of prices paid dropped to 51.9 from 55.5.

The ISM manufacturing index released Aug. 1 showed activity eased from a one-year high, with orders and production remaining strong while employers cut staff.