| Consensus | Consensus Range | Actual | Previous | |
| Index | 54.5 | 53.8 to 55.5 | 54.1 | 54.0 |
Highlights
ISM services nearly steady at 54.1 in July versus 54.0 in June, and just below the Econoday consensus forecast at 54.5. All suggests ongoing moderate growth with some signs of strength underneath.
New orders is stronger at 57.2 in July, up from 55.1 in June, a promising sign for the future. Production jumps to 59.1 from 55.4, a very strong reading. A negative is employment, down to 47.4 in July from 51.2 in June, not a vote of confidence in the outlook as firms cut staff.
Also unfortunate is the input pricing picture with the prices index at 70.3 in July, up from 67.7 in June. Services firms remain in the midst of pricing shocks linked to the Mideast war and its attendant supply chain disruptions.
Market Consensus Before Announcement
Services seen somewhat higher at 54.5 in July from 54.0 in June.
Definition
Producing a monthly composite on general activity tracked in volumes, the Institute for Supply Management surveys several hundred service-providing firms from 16 industries (construction and mining are included). The services composite index has four equally weighted components: business activity (closely related to a production index), new orders, employment, and supplier deliveries (also known as vendor performance). The first three components are seasonally adjusted but the supplier deliveries index does not have statistically significant seasonality and is not adjusted. For the composite index, a reading above 50 percent indicates that the services economy is generally expanding; below 50 percent indicates that it is generally declining. The supplier deliveries component index requires extra explanation: a reading above 50 percent indicates slower deliveries and below 50 percent indicates faster deliveries.
Description
Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data like the ISM services index, investors will know what the economic backdrop is for the various markets. The services index is a composite of four equally weighted components: business activity, new orders, employment, and supplier deliveries. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly -- and causing potential inflationary pressures. While the ISM manufacturing index has a long history that dates to the 1940s, this report goes back to 1997. Note that in 2020 the ISM changed the name of the report to services from non-manufacturing though it continues to track two key goods producing industries: construction and mining.
