The U.S. services sector expanded at a slower pace in July as the non-manufacturing index fell to 55.8 from 59.1 in June, on a seasonally adjusted basis, the Institute for Supply Management reported Friday.

An index reading below 50 signals a slowing economy, while a level above 50 suggests expansion.

Institute for Supply Management non-manufacturing index

Economists polled by IFR Markets had expected a 58.7 level.

The prices paid index grew to 63.4 from 60.7, the 29th consecutive month prices rose, the ISM said. The employment index rose to 56.1 from 53.6.

The business activity/production index slid to 56.5 from 63.9, the new orders index was at 57.0, off from 63.2; backlog of orders dropped to 51.5 from 56.5; new export orders decreased to 58.0 from 60.5; inventories remained at 53.5; inventory sentiment increased to 58.0 from 57.5; the supplier deliveries index slid to 53.0 from 55.5; and imports rose to 52.5 from 51.5.

Members' general comments on business in the month included:

  • “Business is strong in both our commercial-construction and residential-service areas.” (Construction)
  • “Current local and national conditions are good. On track to meet goals and projections for 2018.” (Finance & Insurance)
  • “There has been little change in business activity, despite all of the political turmoil. Patients get sick regardless of what is going on in the economy.” (Health Care & Social Assistance)
  • “Vendors continue to report that they are seeing significant increases in order volume this year. They report having to hire more staff to keep up with the increase in orders.” (Management of Companies & Support Services)
  • “Tariffs continue to make steel pricing volatile. Crude oil has trended over (US)$70 a barrel, which provides a bullish outlook for the duration of 2018.” (Mining)
  • “The improving U.S. economy is having a positive impact on our sales growth in all business sectors, with oil and gas taking the lead.” (Other Services)
  • “Generally optimistic. High labor-participation rates, but a GDP (gross domestic product) forecast of about 4 percent is tempered by tariff issues with China and the European Union.” (Professional, Scientific & Technical Services)
  • “Expanding concerns with price increases due to tariff and global trade policy changes and uncertainty. Receiving more requests from suppliers for price increases due to changes in the costs of steel, aluminum and the like.” (Public Administration)
  • “Business is up overall, but a lot of questions loom over the rest of the year. These include concerns about international markets and the increasing tariffs that impact the landed costs of goods.” (Retail Trade)
  • “Import tariffs on wood and steel. Shortages of rail cars, truck drivers and skilled labor. High-priced construction materials.” (Wholesale Trade)

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