• Component gains led by business activity & new orders.

• Employment improves but supplier delivery speeds increase.

• Prices index declines sharply.

The U.S. Services PMI increased to 56.7 during July from 55.3 in June according to the Institute for Supply Management. The July reading was the highest in three months but remained below the peak of 68.4 in November 2021. The Action Economics Forecast Survey expected 53.9 for July.

Haver Analytics constructs a composite index combining the services index and the manufacturing reading released Monday. This index rose to 56.3 from 55.0 in June, a three-month high. These series date back to July 1997. During the last 15 years, there has been a 68% correlation between the composite index and the quarterly change in real GDP.

In the latest services survey, the business activity index surged to 59.9 in July from 56.1 in June. It was the highest level since December 2021. Thirty-three percent (NSA) of respondents reported higher activity this month versus 27% in June. A lessened 11.4% reported an activity decline, down from June's 12.5%. The new orders index strengthened to 59.9, the highest level since March. Thirty-three percent (NSA) of respondents reported more orders while 12.8% reported a decline.

The employment index rose to 49.1 from 47.4, but continued to indicate shrinking employment levels. Twenty-four percent (NSA) of respondents indicated higher employment and the same percentage reported a decline.

Working lower, the supplier deliveries index fell to 57.8 (NSA) in July, indicating the quickest delivery speeds since January 2021. An improved 9.6% of respondents reported faster delivery speeds while a lessened 25.2% reported slower speeds.

The prices index plunged to 72.3 in July from 80.1 in June. It was the lowest level since February of last year, down from a record 84.6 in April. A lessened 54% (NSA) of respondents reported price increases while an increased 6.3% reported price declines.

The new export orders index improved modestly to 59.5 in July from 57.5 in June, indicating expansion in new export orders for the sixth straight month. The order backlog index fell to 58.3 from 60.5. The inventory change index decreased to 45.0, the lowest level in nine months. The imports index rose slightly to 48.0 in July after falling sharply to 46.3 in June. Both series indicate inventory decumulation. These series are not seasonally adjusted and not included in the ISM Services PMI total.

The ISM figures are available in Haver's USECON database, with additional detail in the SURVEYS database. The expectations figure from Action Economics is in the AS1REPNA database.

Reflections on the Disinflationary Methods of Poincare and Thatcher from James Bullard, President & CEO, Federal Reserve Bank of St. Louis can be found here.