Economic activity in the US services sector, the biggest part of the economy, nearly stagnated in July as new orders slowed and employment contracted amid uncertainty over tariffs.
The US services purchasing managers index (PMI) slowed to 50.1 in July from 50.8 in June, the Institute for Supply Management (ISM) reported Tuesday. Readings above 50 signal growth while readings below that threshold mean contraction.
New orders fell 1 percentage point to 50.3 while the employment index fell to 46.4, marking a fourth month of contraction in the last five months, in line with last week's employment report showing weak job growth in the three months through July.
The business activity/production index fell to 52.6 in July from 54.2, showing slowing expansion.
"Our business activity is flat. We are not trending up or down," one services survey respondent said. "Tariffs are now starting to show up in pricing, and we are seeing increases across the board."
The latest ISM report on services follows a 30 July report from ISM showing the manufacturing PMI fell to 48 in July, marking a fifth month of contraction.
The supplier deliveries index rose to 51, an eighth month of expansion, from 50.3, ISM reported Tuesday. Expansion in the index indicates slower deliveries, partly due to slowing deliveries from overseas suppliers.
"Economic uncertainty remains the dominant theme. However, the tariff talk has turned out to be much more bluster than actual policy, and businesses have seemed to tune out the noise," another respondent said.
The prices index rose by 2.4 points to 69.9, the highest since October 2022.
