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The Institute for Supply Management (ISM) reported on Monday its non-manufacturing index (NMI) came in at 53.7 in July, which was 1.4 percentage points lower than the June reading of 55.1 percent. The July reading pointed to the slowest expansion in the services sector since August 2016.

Economists forecast the index to increase to 55.5 last month. A reading above 50 signals expansion, while a reading below 50 indicates contraction.

Of the 18 manufacturing industries, 13 reported growth last month, the ISM said, adding that respondents indicated ongoing concerns related to tariffs and employment resources.

According to the report, the ISM’s non-manufacturing business activity measure fell to 53.1 percent, 5.1 percentage points lower than the June reading of 582 percent. That reflected growth for the 120th consecutive month, at a slower rate in June. The new orders gauge decreased to 54.1 percent, 1.7 percentage points lower than the reading of 55.8 percent in June. The Prices Index dropped 24 percentage points from the June reading of 58.9 percent to 56.5 percent, indicating that prices increased in July for the 26th consecutive month. Meanwhile, the employment indicator rose 1.2 percentage points in July to 56.2 percent from the June reading of 55 percent.

 Commenting on the data, the Chair of the ISM Non-Manufacturing Business Survey Committee, Anthony Nieves, noted, "The past relationship between the NMI and the overall economy indicates that the NMI for July (53.7 percent) corresponds to a 1.8-percent increase in real gross domestic product (GDP) on an annualized basis.”

The latest report by IHS Markit revealed on Monday the seasonally adjusted final IHS Markit U.S. Services Business Activity Index (PMI) stood at 53.0 in July, up from 51.5 in June and up from the earlier released “flash” figure of 52.2.

The reading signaled the fastest business activity expansion across the U.S. service sector since April.

Economists had forecast the index to stay unrevised at 52.2.

According to the report, new orders received by service providers increased at the fastest rate since March and new business from abroad grew at the strongest pace for five months. Meanwhile, the rate of job creation was only moderate overall, and inflationary pressures were historically subdued, with rates of both input price and output charge inflation easing.

Before the bell: S&P futures -1.49%, NASDAQ futures -2.06%

U.S. stock-index futures declined sharply on Monday as a trade war between the world’s largest economies intensified after China weakened its currency to its lowest level since 2008 in response to the U.S. President Trump's threat to impose new 10% tariff on $300 billion worth of Chinese imports. In addition, Beijing asked state companies to discontinue purchasing U.S. agricultural products. 

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