Financial News: U.S. Service Sector Growth Unexpectedly Slows In July

U.S. Service Sector Growth Unexpectedly Slows In July

08/05/2025 - 10:30:00 (RTTNews)

(RTTNews) - A report released by the Institute for Supply Management on Tuesday unexpectedly showed a modest slowdown in the pace of growth by U.S. service sector activity in the month of July.

The ISM said its services PMI edged down to 50.1 in July from 50.8 in June. While a reading above 50 still indicates growth, economists had expected the index to rise to 51.5.

The unexpected dip by the headline index came as the business activity index slid to 52.6 in July from 54.2 in June and the new orders index fell to 50.3 in July from 51.3 in June.

The employment index also slipped to 46.4 in July from 47.2 in June, dropping further into contraction territory after one month of expansion in May.

Meanwhile, the ISM said the backlog of orders index climbed to 44.3 in July from 42.4 in June, indicating a slower pace of contraction.

The report also said the prices index jumped to 69.9 in July from 67.5 in June, reaching its highest level since hitting 70.7 in October 2022.

"July's PMI level continues to reflect slow growth, and survey respondents indicated that seasonal and weather factors had negative impacts on business," said Steve Miller, Chair of the ISM Services Business Survey Committee. "The Employment Index's continued contraction and faster expansion of the Prices Index are worrisome developments."

He added, "However, continued expansion in the Business Activity and New Orders indexes, together with a slight improvement in the Backlog of Orders Index, highlight the resilience of the U.S. services sector."

Last Friday, the ISM released a separate report showing manufacturing activity in the U.S. unexpectedly contracted at a slightly faster rate in the month of July.

The ISM said its manufacturing PMI edged down to 48.0 in July after inching up to 49.0 in June, with a reading below 50 indicating contraction. The dip surprised economists, who had expected the index to creep up to 49.5.

With the unexpected decrease, the manufacturing PMI fell to its lowest level since hitting 46.9 in October 2024.

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