The Institute for Supply Management (ISM) reported on Wednesday, August 5, that its Services PMI rose to 54.1 in July from 54.0 in June, extending the sector's expansion to a 25th consecutive month. The reading came in slightly below the 54.5 consensus among economists polled ahead of the release, according to InvestingLive.
The composite index, where readings above 50 indicate expansion, was 0.7 percentage point above its 12-month average of 53.4. ISM notes that readings above 48.1 generally indicate growth in the overall U.S. economy.
The detail of the July report was mixed. The Business Activity Index jumped 3.7 percentage points to 59.1, its second-highest reading since May 2024, and the New Orders Index rose 2.1 percentage points to 57.2, the fifth-highest reading in that period, according to the ISM release. The Employment Index, however, fell back into contraction after a single month in expansion, dropping 3.8 percentage points to 47.4 — its lowest level since March and below the 50 threshold in 12 of the last 18 months.
Price pressures intensified: the Prices Index climbed 2.6 percentage points to 70.3, the fourth time in five months the index has topped 70. It has exceeded 60 for 20 straight months, and its 12-month average rose to 68.1, the highest since April 2023, ISM said.
Elsewhere in the report, the Supplier Deliveries Index eased 1.6 percentage points to 52.8 but remained in expansion territory for a 20th consecutive month, indicating slower deliveries. The Inventories Index edged up to 51.4, the Backlog of Orders Index fell 4 percentage points to 50.9, the New Export Orders Index rose 1.6 percentage points to 52.0 and the Imports Index returned to expansion at 51.8.
Thirteen services industries reported growth in July, one fewer than in June, led by Retail Trade and Transportation and Warehousing; four reported contraction, including Health Care and Social Assistance and Real Estate, Rental and Leasing.
ISM said tariff impacts and the Middle East conflict were still mentioned by survey respondents, but much less frequently than in prior reports, while the World Cup was again cited as a driver of increased business activity and new orders. The report also flagged lingering concerns about mortgage and inflation rates, while describing the U.S. services economy as resilient.
The renewed acceleration in prices keeps cost pressures in focus. PNC Economics Research said in a note published on August 5 that input cost pressures, including wage growth, are likely to constrain profit margins and limit the pace of expansion in the second half of 2026, and that subdued hiring across services — a sector that accounts for more than 85 percent of total U.S. employment — limits upside potential for the broader economy.
Sources
- [PR Newswire / ISM — Services PMI at 54.1%; July 2026 ISM Services PMI Report](https://www.prnewswire.com/news-releases/services-pmi-at-54-1-july-2026-ism-services-pmi-report-302843134.html)
- [PNC Economics Research — ISM Services Survey, 5 August 2026](https://www.pnc.com/content/dam/es/pnc-com/pdf/aboutpnc/EconomicReports/EconomicUpdates/2026/PNC_Economics_Research_ISM_Services_5_August_2026.pdf)
- [InvestingLive — US July ISM services index 54.1 vs 54.5 expected](https://investinglive.com/news/us-july-ism-services-index-vs-54-5-expected/)
