The Institute for Supply Management's services PMI came in at 54.1 in July, marking the 24th consecutive month of growth in the sector. The reading, which tracks business conditions across non-manufacturing industries, signals continued expansion — anything above 50 indicates growth.
What the PMI reading means
The July figure is slightly below June's 55.1 but still comfortably in expansion territory. The services sector accounts for roughly two-thirds of U.S. economic activity, so sustained growth here suggests the broader economy is holding up despite higher interest rates. New orders and employment subindexes also remained positive, though some respondents noted slower customer demand.
Pressure on the Federal Reserve
The data arrives as the Federal Reserve weighs its next move on interest rates. A resilient services sector could give policymakers room to keep rates higher for longer, since the economy isn't showing clear signs of a sharp slowdown. But the Fed also watches inflation — and services prices have been sticky. The PMI's prices index edged up, a detail that won't be lost on central bank officials.
Investors and economists will now watch the upcoming consumer price index report and the Fed's Jackson Hole symposium later this month for more clues on the rate path. The ISM's manufacturing PMI, due next week, will offer a fuller picture of the economy's health.
