US: Solid services activity in July – Wells Fargo

An unexpected rise in the July ISM Service PMI helped the US Dollar on Wednesday. The index showed a “broad pickup in the sector”, point out analysts at Wells Fargo. They consider the jump in new orders bodes well for coming demand, and an array of measures suggests supply chain pressures continue to ease. 

Key Quotes: 

“The ISM services index not only defied the consensus expectation for a decline but rose by the most in five months in July.”

“While the overall report indicates still solid activity in the sector, some selected industry comments from purchasing managers did point to a weakening economic environment and coming headwinds for sales. Growing fears of recession are likely weighing on optimism to some extent.”

“The employment component remained below the 50-threshold designating expansion from contraction, but it did improve 1.7 points last month to 49.1. This suggests the labor market is cooling, but not rapidly deteriorating as feared given increased concern of an imminent recession.”

“Given the uptick in current activity and new orders, service-providers are still finding it necessary to hire, even if the need for labor is not as great as it has been over the past two years.”

“We expect demand for labor is starting to ease more meaningfully as the labor market shows signs of cooling.”