Markit’s latest PMI figures provide an early signal that robust growth momentum has been sustained into the third quarter.
The seasonally adjusted Markit Flash U.S. Services PMI™ Business Activity Index – which is based on approximately 85% of usual monthly replies – registered 61.0 in July, above the neutral 50.0 threshold and an unchanged reading from June‟s survey-record high.
July‟s survey therefore suggests a strong expansion of U.S. service sector business activity so far this summer, and a continued rebound in business conditions after snow disruptions at the start of the year. That said, service providers indicated a moderation in new business growth and weaker job creation than the highs registered in June.
New business growth eased for the first time in four months during July, after reaching its fastest in almost five years of data collection. The latest survey also pointed to a renewed reduction in backlogs of work across the service sector, with some firms citing reduced pressure on operating capacity at their units. A slight drop in unfinished work in July contrasted with a moderate increase in backlogs during the previous two months.
Service providers indicated an overall rise in payroll numbers during July, continuing the upward trend recorded for almost four-and-a-half years. However, the rate of job creation eased markedly from the survey-record high seen in June. Companies that boosted their staffing levels generally commented on sustained increases in their volumes of new work. However, some survey respondents noted a degree of caution about the business outlook.
July data indicated a moderation in service providers‟ expectations for business activity over the year ahead. Although still well inside positive territory, the degree of service sector optimism eased to its lowest since November 2012.
Meanwhile, input price inflation subsided during July, with the latest rise in overall cost burdens the weakest since April 2013. A relatively subdued rate of cost inflation contributed to a slower rise in service providers‟ output charges in July. Latest data indicated that average tariffs increased for the thirteenth successive month, but the pace of inflation was only marginal and the weakest seen over this period.
At 60.9 in July, the seasonally adjusted Markit Flash U.S. Composite PMI Output Index was little-changed from 61.0 in June and close to its highest since the series began in October 2009. However, latest data indicated the least marked rises in new business volumes and payroll numbers for three months. Meanwhile, input price inflation across the manufacturing and service sectors combined was the slowest since March.