The IHS Markit survey's flash services sector PMI fell to a reading of 59.8 from 64.6 in June, slowing further from May's record high. Analysts' expected a reading of 64.8 this month for the services sector, which accounts for more than two-thirds of U.S. economic activity.
Meanwhile IHS Markit US Manufacturing PMI hit another record high of 63.1 in July, easily beating market expectations of 62. preliminary estimates showed. A measure of new orders received by factories increased and manufacturers reported unfinished work continued to pile up even as hiring picked up. Suppliers continued to struggle to deliver inputs on time.
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Services sector PMI fell to the lowest level since February while Manufacturing PMI hit a new record high. Source: Bloomberg via ZeroHedge
Today's PMI reading pointed to a further slowdown in service sector growth from May's record high, amid labor shortages and difficulties acquiring stock. New business rose the least for five months, with some firms noting customer hesitancy amid significant hikes in selling prices. Similarly, the rate of increase in new export orders eased. Although firms recorded solid gains in employment, the level of outstanding business rose further in July. On the price front, input costs and output charges continued to rise at a strong rate. As a result, companies are passing on to consumers the higher production costs leading to increased concerns about inflation. Looking ahead, business confidence fell to a five-month low according to Markit Economics
Continued inflationary pressures, supply constraints and the spread of the delta variant appear to be increasing uncertainty among firms. If this trend continues, then it could translate into reductions in expenditure, investment and hiring, increasing the possibility of a further slowdown in growth in the near future.
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