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Investing.com - U.S. services sector activity slowed in July, weighed down a deceleration in new orders and an uptick in input prices, reflecting potential headwinds from President Donald Trump’s aggressive tariff agenda.
The Institute for Supply Management’s non-manufacturing purchasing managers’ index for the month came in at 50.1, down from a prior mark of 50.8. Economists had anticipated a reading of 51.5.
A level above 50 denotes expansion, although the ISM associates a PMI mark above 49 over time with overall economic growth. Services represent a critical portion of the U.S. economy, accounting for more than two-thirds of activity.
The ISM’s gauge of new orders dipped to 50.3 from 51.3 in June, dragged down in particular by a contraction in export orders for the fourth time in five months.
Inflation was also a persistent concern, with the survey’s prices paid index rising to 69.9 -- its highest level since 2022.
"The most common topic among survey panelists remained tariff-related impacts, with a noticeable increase in commodities listed as up in price," said Steve Miller, Chair of the ISM Services Business Survey Committee, in a statement.
Tuesday’s figures could be a sign of upcoming pressures on the economy over the second half of 2025. Recent data has suggested that while the U.S. returned to growth in the second quarter, consumer spending moderated, business investment eased and residential investment contracted -- all potential red flags over the remainder of the year.
Meanwhile, July’s employment report was weaker than anticipated and revised payrolls for the prior two months were both heavily lowered, denting hopes that the labor market has largely been able to weather the tariff storm.