Key Takeaways
- The Purchasing Managers’ Index, a measure of business activity, rose to a 27-month high in July.
- Services grew more than economists expected.
- Manufacturing was a drag on the index, as it fell to a six-month low.
Businesses in the service sector grew in July, while manufacturing took a step backward, according to the latest snapshot of U.S. business activity.
Wednesday’s Purchasing Managers’ Index (PMI) showed service activity hit a 28-month high. The services index was a full point ahead of economists’ expectations, which helped push the measure of business output across sectors to its highest level in 27 months.
“Data signal a ‘Goldilocks’ scenario at the start of the third quarter, with the economy growing at a robust pace while inflation moderates,” said Chris Williamson, chief business economist at S&P Global Market Intelligence. The reading comes ahead of Thursday’s report on second-quarter gross domestic product.
The service sector outpaced manufacturing for a fourth straight month, with the two industries now at their greatest distance in more than a year.
The manufacturing index fell to a six-month low in July. The reading dropped below the threshold that indicates manufacturers have an overall negative view of current conditions.
“From the output perspective, growth has become worryingly skewed, with manufacturing slipping back into contraction as the service sector gains further strength,” Williamson said.