The ISM Services PMI rose to 54.1 in July, a slight improvement from June that still fell short of forecasts. The survey's employment gauge slipped back into contraction while its prices index jumped to 70.3, leaving the Federal Reserve weighing softer hiring against firmer cost pressure.
The Institute for Supply Management's Services PMI rose to 54.1 in July from 54.0 in June. The reading missed the 54.2 market forecast, a slight shortfall for the sector. Beneath that steady headline, however, the report showed a split: hiring slipped back into contraction while price pressures accelerated.
Hiring Slips Back Into Contraction
Hiring took the bigger hit: the survey's Employment Index dropped to 47.4 from 51.2, falling back into contraction after just one month of growth. The pullback followed softer ADP payroll data released the same day, reinforcing signs that hiring momentum is cooling. Respondents pointed to AI adoption and a shift of jobs to lower-cost overseas locations as reasons behind the cuts.
Price Pressures Build
Inflation moved the other way: the Prices Index climbed to 70.3 from 67.7. That marks the 110th consecutive month of rising input costs. Reuters put the index's 12-month average at 68.1, the highest since April 2023.
Oil-supply constraints out of the Middle East have pushed energy prices broadly higher, Reuters reported, with ISM adding that the economy is "in the midst of pricing impacts due to the recent run-up in petroleum costs." Separately, ISM Services Business Survey Committee chair Steve Miller said tariff and Middle East mentions came much less often than in prior reports.
Demand Holds, Leaving the Fed a Balancing Act
Demand held up: business activity jumped to 59.1 from 55.4. New orders rose to 57.2 from 55.1. Businesses cited the FIFA World Cup as a driver of the increase.
The mix leaves the Fed weighing a familiar trade-off: slowing hiring argues for patience, while persistent cost pressures will likely keep the Fed cautious about declaring victory over inflation.
Sources: ActionForex, Economic Indicators News, Crypto Briefing
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