July data pointed to another strong rise in U.S. service sector output, with the pace of expansion moderating only slightly from June‟s survey-record high. That said, the latest increase in new business volumes was the least marked for three months and service providers‟ confidence about the year-ahead business outlook slipped to the lowest since November 2012. Meanwhile, the latest survey indicated a moderation in input cost inflation and, as a result, average prices charged by service sector companies increased only marginally.
At 60.8 in July, the final seasonally adjusted Markit US Services Business Activity Index held close to the survey-record high registered in June (61.0). The earlier „flash‟ reading was 61.0 in July. The index has now registered above the neutral 50.0 value for nine months running and the latest reading indicated a sharp overall expansion of service sector output. Anecdotal evidence generally linked rising levels of business activity to sustained growth of new work and improving conditions across the domestic economy.
Volumes of new work received by service providers increased at a robust pace in July. However, in line with the trend for output, the rate of new business expansion eased from the post-crisis high seen in June. The latest rise in new work was the weakest since April, but still stronger than the average since the survey began in late-2009.
Slower new business growth contributed to a renewed reduction in outstanding business across the service sector in July. The marginal drop in unfinished work contrasted with a moderate accumulation of backlogs in each of the previous two months.
Higher levels of output and new work nonetheless contributed to a further increase in payroll numbers at service sector companies in July. Jobs growth has been recorded in each month since March 2010, but the latest reading was much lower than June‟s survey-record high. Meanwhile, service providers indicated the least marked degree of positive sentiment towards the business outlook for just over a year-and-a-half.
Input cost inflation eased for the first time in four months during July. The latest rise in cost burdens was also the slowest since April 2013. This in turn contributed to the weakest increase in service sector output charges for just over a year.
