The July Business Activity Index for the non-manufacturing sector reversed about half of the prior month's improvement and fell 1.7 points to 60.5, reported the Institute for Supply Management. Consensus expectations had been for a decline to 61.

Since the series' inception in 1997 there has been a 50% correlation between the Business Activity Index and the q/q change in real GDP for services plus construction.

A employment index reversed just a piece of the June improvement and fell to a still firm 56.2. Since the series' inception in 1997 there has been a 60% correlation between the level of the ISM non-manufacturing employment index and the m/m change in payroll employment in the service producing plus the construction industries.

Moving the other way, the index of new orders jumped 2.4 points to 61.9, the highest level since March. Pricing power also surged. A 10.5 point gain m/m raised the index level to the highest level of this year (70.3).

ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The non-manufacturing survey dates only to July 1997, therefore its seasonal adjustment should be viewed tentatively.

Business Activity Index for the non-manufacturing sector reflects a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index is a weighted average five components.