U.S. service providers signalled a slight rebound in business activity growth from the five-month low recorded in June. This was highlighted by a rise in the seasonally adjusted Markit Flash U.S. Services PMI™ Business Activity Index from 54.8 to 55.2 in July. The latest index reading – which is based on approximately 85% of usual monthly replies – was well above the crucial 50.0 no-change mark, but still weaker than the average for 2015 to date (56.3).
Higher levels of service sector output have been recorded by the survey in each month since November 2013, with the latest upturn attributed to improving U.S. economic conditions and an associated increase in client spending. July data indicated that overall growth of new work picked up to a three-month high, reflecting rising levels of business and consumer spending, alongside successful marketing strategies and new product launches.
Sustained new business growth, and a slight increase in backlogs of work, contributed to another upturn in payroll numbers in July. Higher levels of service sector employment have been recorded for almost five-and-a-half years, and the rate of staff hiring in July was faster than the average seen over this period.
Service providers are upbeat overall about their growth prospects over the next 12 months, with around 41% of the survey panel forecasting a rise in business activity and only 3% anticipating a reduction. However, at 65.3 in July, the resulting Future Activity Index was down from 69.0 in June and the lowest for just over three years. Anecdotal evidence suggested that uncertainty regarding the economic outlook both at home and abroad had weighed on some service providers’ projections for activity growth over the next 12 months.
The latest survey meanwhile pointed to a solid increase in average cost burdens across the service sector. That said, the rate of inflation eased from June’s 20-month high. Prices charged by service providers also increased at a slower pace in July, which survey respondents linked to softer cost pressures and competitive pricing strategies.
Markit Flash U.S. Composite PMI™
Adjusted for seasonal influences, the Markit Flash U.S. Composite PMI Output Index posted 55.2 in July, up slightly from 54.6 in June and above the neutral 50.0 threshold for the twenty-first successive month.
The latest reading signalled a rebound in U.S. private sector output growth from June’s five month low, helped by faster rises in both manufacturing and services activity.