U.S. private sector business activity stabilizes in July - IHS Markit's survey

Preliminary data released by IHS Markit on Friday pointed to stabilization of business activity at the start of the third quarter in July.

According to the report, the Markit flash manufacturing purchasing manager's index (PMI) came in at 51.3 in July, up from 49.8 in June, indicating the first improvement in operating conditions since February. Economists had expected the reading to increase to 51.5. A reading above 50 signals an expansion in activity, while a reading below this level signals a contraction. According to the report, growth was driven by the first upturns in both output and new orders for five months, while employment was broadly unchanged.

Meanwhile, the Markit flash services purchasing manager's index (PMI) rose to 49.6 in July from 47.9 in the prior month, pointing to the weakest contraction in services activities in six months. Economists had expected the reading to rise to 51.0. According to the report, new business fell at a slightly quicker rate in July due to the resurgence in the virus outbreak and weaker client demand, while pressure on capacity led to a slight increase in workforce numbers.

Overall, IHS Markit Flash U.S. Composite PMI Output Index came in at 50.0 in July, up from 47.9 in June, signaling a stabilization in private sector output after five straight months of decline.

Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at HIS Markit, noted: “While the stabilization of business activity in July is welcome news, the lack of growth is a disappointment. Moreover, a renewed acceleration in the rate of loss of new business raises concerns that demand is faltering. Many companies, notably in consumer-facing areas of the service sector, linked falling sales to re-imposed lockdowns.”