The Institute for Supply Management's (ISM) non-manufacturing index fell one point in July to 55.5 from a seven-month high in the prior month. The data missed expectations for a reading of 55.9. Despite the decline, the index remains well in expansionary territory and above the 6-month average of 54.8. and signals moderate growth ahead.
The details of the report showed that the important new orders subcomponent continued to rise, and is currently at 60.3, up +0.4 points, its highest level since last October. Pending orders edged back from contraction zone to 51.0, while the new export orders and inventory sentiment subcomponents rose modestly on the month to 55.5 and 63.0 respectively. Inflationary pressures continued to cool in July, declining for a second consecutive month, with the prices paid down-3.6 points to 51.9.
Data suggested that economic activity outside of the manufacturing sector continues to expand at a moderate pace. However, the employment component retreated to 51.4 from 52.7 in June. Softer employment readings from both of the ISM indices in July raise downside risk to nonfarm payrolls on Friday.
