US service sector activity continues to grow at slower pace in July

US service sector continued to remain muted according to July’s data. Services activity rose at the slowest rate in the current five-month sequence of growth. New business also expanded at a slower rate. The seasonally adjusted Markit final US Services PMI Business Activity Index was unchanged from June’s figure of 51.4.

It came in above the flash reading of 50.9. The index was above the neutral 50 threshold for the fifth straight month. But the July reading indicated a very modest growth of business activity that was weaker than the post-crisis trend.

The latest survey data showed an additional moderate upturn in new business received by service sector firms. Additionally, the growth rate continued to accelerate from March’s post-crisis low and rose at its most rapid in seven months in July, noted Markit.

According to survey respondents, slowly improving economic conditions and competitive pricing strategies led to a rise in client spending at the beginning of the third quarter.

There was an increase registered in volumes of work outstanding for the first time in 12 months in July. However, the rate of backlog accumulation was just marginal. Certain companies acknowledged that firmer than anticipated new business growth had led to larger levels of unfinished work at their units.

Rise in new order volumes and renewed pressure on operating capacity added to a sustained rise in payroll numbers in July. Job creation rose at the most rapid pace in three months; however it continued to be slightly less marked than the average since the present period of growth started in March 2010.

Service providers have hinted at a recovery in business sentiment in the latest survey, with the balance of companies anticipating an increase in activity in the year-ahead reaching the highest level since January, stated Markit.

According to anecdotal evident, upcoming new projects, hopes of rebounding economic conditions and resilient client demand had supported business sentiment in July.

In the meantime, input price inflation continued to be weak in July, with the recent increase in average cost burdens the most decelerating since the beginning of 2016. This also added to an additional slowdown in output charge inflation throughout the service sector in July.