US Services Surveys Signal Rebound In Growth In July, But…

Following the mixed picture from yesterday’s Manufacturing surveys (ISM 4 year high, S&P Global 3 mo low driven by the bifurcated ‘AI vs The Rest’ economy), this morning’s Services sector surveys were ‘expected’ to show the opposite (ISM down, S&P Global up) all in the face of fading hard data.

• S&P Global US Services PMI jumped from 51.2 (final June) to 53.6 (prelim July) to 54.6 (final July) – the highest since Oct 2025

• ISM US Services PMI rose from 54.0 to 54.1 (less than expected 54.5).

Source: Bloomberg

That was S&P Global’s Services PMI’s biggest monthly jump since May 2024…

Under the hood, S&P Global data shows that growth in new work strengthened to a 19-month high, while business confidence regarding activity over the coming 12 months was the strongest since last November.

Private sector employment rose for the first time since April.

But, input price inflation accelerated to the highest since November 2022, pushing composite selling prices up at the quickest pace in exactly one year.

But, the ISM Survey showed considerably differences with employment data tumbling back into contraction (below expectations), pries picking up (more than expected), but new orders rising more than expected…

• Prices Paid 70.3, Exp 65.0

• Employment 47.4, Exp. 51.2

• New Orders 57.2, Exp. 55.9

A somewhat stagflationary signal…

“The final July PMI has come in stronger than the earlier flash estimate, signaling an encouraging acceleration in economic growth at the start of the third quarter,” according to Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.

The Composite PMI points to GDP rising at an annualized rate of 2.3%, following a 1.5% increase indicated for the second quarter.

Business optimism has meanwhile climbed to its highest since last November, but Williamson warns:

“Some caution is needed in interpreting these improvements, as the stronger performance partly reflected temporary factors. We note that the biggest improvement in demand in July was reported among consumer-facing service providers, spending on which surged at a rate not seen for over four years linked to the FIFA World Cup and US Independence Day events.

More importantly, businesses benefited in early July from a tailwind of reduced geopolitical uncertainty and lower oil prices.”

But, with hostilities in the Gulf escalating as the month progressed, the geopolitical environment is now likely once again acting more as a headwind to growth again while exacerbating already elevated price pressures.

…unless, of course, an actual deal is reached.