#United States #Tempe #Economic Expansion #ISM Services PMI #Services Sector

July 2026 ISM Services PMI Report: Economic Activity Continues to Expand

In July 2026, the U.S. services sector witnessed sustained growth, as reflected in the ISM Services PMI report released by the Institute for Supply Management (ISM). The PMI stood at 54.1%, marking the 25th consecutive month of expansion in this crucial segment of the economy. This figure represents a slight increase from the previous month’s 54.0%.

Key Insights from the Report

Steve Miller, Chair of the ISM Services Business Survey Committee, noted that the Business Activity Index surged to 59.1%, showcasing a robust increase of 3.7 percentage points compared to June's 55.4%. Furthermore, the New Orders Index climbed to 57.2%, illustrating a positive trajectory as it rose 2.1 percentage points from the prior month.

Despite the positive trends noted in business activity and new orders, the Employment Index reported a contraction at 47.4%, dropping 3.8 points from June's reading. This indicated that the employment sectors are facing challenges, as the index has now fallen below 50% for 12 out of the last 18 months.

Additionally, the Supplier Deliveries Index showed slower performance with a reading of 52.8%, down from 54.4%, but still indicating expansion over a period of 20 consecutive months. It is noted that this slowdown may align with the increasing demand as the economy grows.

Rising Prices and Inventory Adjustments

The Prices Index reported a significant increase of 2.6 percentage points, placing it at 70.3%. This increase highlights ongoing inflationary pressures, particularly in commodities and services. Over the previous months, the index has maintained a reading above 60%, reflecting the persistent rise in costs experienced by service providers.

In terms of inventory metrics, the Inventories Index rose to 51.4%, signifying an upward adjustment in inventory levels. The Inventory Sentiment Index indicates that companies feel their inventories are becoming too high, continuing a trend for 39 consecutive months.

Industry Performance Breakdown

The report highlighted that 13 industries reported growth in July, notably including Retail Trade, Transportation & Warehousing, and Construction. In contrast, sectors experiencing contraction included Agriculture, Forestry, Fishing & Hunting, and Health Care & Social Assistance.

Among the comments from industry participants, sentiments regarding business activity were generally optimistic, although some pointed to economic uncertainties related to inflation, mortgage rates, and global conditions, notably the Middle East conflict’s impact on oil prices.

The report also drew attention to specific supply chain challenges, with mentions of ongoing issues related to technical labor shortages and adjustments in ordering practices to counter long lead times.

Conclusion

As of July 2026, the services sector continues to demonstrate resilience amidst various economic challenges. While growth remains apparent in multiple areas, careful monitoring of employment trends and inflation rates will be crucial as businesses navigate these economic conditions. The Services PMI readings imply that the broader economy is benefiting from this ongoing growth, with potential for a significant increase in real GDP, estimated at approximately 1.9% on an annualized basis. The next ISM Services PMI report, featuring August data, will be released on September 3, 2026, providing further insights into ongoing trends.