WASHINGTON – Growth at U.S. service providers cooled in July after reaching a seven-month high, consistent with more measured progress in the economy.
The 55.5 reading in the Institute for Supply Management’s non-manufacturing index followed 56.5 the prior month, the Tempe, Ariz.-based group’s report showed Wednesday. Readings above 50 signal expansion. The median forecast of economists surveyed by Bloomberg called for 55.9.
Orders to the service producers that make up about 90 percent of the economy rose to a nine-month high, pointing to further economic growth as manufacturing stabilizes. A healthy job market, higher property and stock prices, and low borrowing costs represent a favorable backdrop for consumer spending coming off its best quarter since 2014.
“The non-manufacturing part of the economy is strong,” Gus Faucher, deputy chief economist at PNC Financial Services Group Inc. in Pittsburgh, said before the report. “The consumer is driving growth. The fundamentals for housing look good. The second-half outlook is better.”
The group’s non-manufacturing survey covers an array of industries including utilities, retailing, and health care, and also factors in construction and agriculture. Fifteen of the 18 industries in the survey reported growth in July, led by entertainment and recreation, accommodation and food services, and real estate.
Bloomberg survey estimates for the services index ranged from 54.3 to 57.
The ISM’s new orders measure advanced to 60.3, the strongest since October, from 59.9. Thirty-five percent of purchasing managers surveyed said demand was higher in July, the biggest share in three months. The business activity index, which parallels the ISM’s factory production gauge, was little changed at 59.3 from the prior month’s 59.5.
The index of non-manufacturing employment decreased to 51.4 from 52.7 the prior month.
The gauge of prices paid dropped to 51.9 from 55.5.
The ISM manufacturing index released earlier this week showed activity eased from a one-year high, with orders and production remaining strong while employers cut staff.
