July 2025 Services PMI indicates slow growth

The Services ISM Report indicates modest growth in the services sector despite challenges.

Service sector growth slows in July 2025

Economic activity in the U.S. services sector grew for the second month in a row in July 2025, with the Services PMI reading at 50.1 percent, slightly down from 50.8 percent in June. The Business Activity Index stood at 52.6 percent, despite dropping from June’s 54.2 percent, showing sustained expansion since May 2020. However, concerns linger as the Employment Index fell further into contraction territory at 46.4 percent, indicating a worrying trend in job growth. Eleven industries reported growth, including Transportation and Finance, while seven experienced contraction.

The reports suggest that while the services sector continues to expand, the pace of growth is slowing, posing potential risks. The impact of increasing prices, highlighted by a Prices Index of 69.9 percent, raises concerns for businesses, especially those impacted by tariffs. This dynamic signifies not just a numerical contraction in employment but also hints at broader economic challenges ahead. The persistent tariff issues may further complicate recovery efforts, indicating that despite slow growth, caution remains crucial for policymakers and business leaders.

Highlights

The outlook remains cautiously optimistic as growth momentum builds amidst challenges.