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Stronger service sector growth helps offset manufacturing in U.S.

Christian Fernsby ▼ | July 26, 2019
At 51.6 in July, the seasonally adjusted IHS Markit Flash U.S.
America   The composite index is based on original survey data from IHS Markit
Composite PMI Output Index edged up from 51.5 in June and remained higher than the three-year low recorded during May.

However, the latest reading signalled only a modest expansion of private sector output.

The composite index is based on original survey data from IHS Markit’s PMI surveys of both services and manufacturing.

Service sector companies recorded the strongest rise in business activity since April.

This helped to offset a downturn in manufacturing production in July.

Although only marginal, the reduction in output across the goods producing sector was the sharpest for almost ten years.

In line with the trend for business activity, latest data indicated that new business growth gained momentum in July and was the fastest for three months.

Improved demand was largely confined to the service economy, which survey respondents linked to resilient consumer spending.

Despite an improvement in order books, the rate of private sector job creation weakened to a 27-month low in July.

Softer employment growth appeared to reflect caution about the near-term business outlook, with the latest survey revealing the lowest degree of optimism since this index began in July 2012.

Inflationary pressures remained subdued, with cost burdens rising only marginally during the latest survey period.

Meanwhile, service providers reported price discounting in July, which contrasted with a sharper rise in factory gate charges across the manufacturing sector.

The headline seasonally adjusted IHS Markit Flash U.S.

Services PMI Business Activity Index picked up to 52.2 in July, from 51.5 in June, to signal the strongest rise in service sector output for three months.

That said, the rate of expansion was only modest and still much softer than seen in the first quarter of 2019.

Growth of business activity was supported by price discounting in July, with average charges reduced to the greatest extent since February 2016.