Growth in U.S. service sector activity slowed by much more than anticipated in the month of July, according to a report released by the Institute for Supply Management on Friday.
The ISM said its non-manufacturing index dropped to 55.7 in July after rising to 59.1 in June. A reading above 50 still indicates service sector growth, although economists had expected a much more modest drop to 58.6.
The report showed a significant decrease by the business activity index, which tumbled to 56.5 in July from 63.9 in the previous month.
The new orders index also slumped to 57.0 in July from 63.2 in June, indicating a notable slowdown in the pace of new orders growth.
The ISM said the supplier deliveries index also dipped to 53.0 in July from 55.5 in June, although a reading above 50 still indicates slower deliveries.
“There has been a ‘cooling off’ in growth for the non-manufacturing sector,” said Anthony Nieves, Chair of the ISM Non-Manufacturing Business Survey Committee.
“Tariffs and deliveries are an ongoing concern,” he added, but noted, “The majority of respondents remain positive about business conditions and the economy.”
Meanwhile, the report said the employment index rose to 56.1 in July from 53.6 in June, suggesting a faster rate of job growth in the service sector.
The Labor Department’s monthly jobs report released earlier in the day showed employment in the service-providing sector increased by 118,000 jobs in July after jumping by 182,000 jobs in June.
On the inflation front, the prices index climbed to 63.4 in July from 60.7 in June, indicating prices increased for the 29th consecutive month.
The ISM released a separate report on Wednesday showing growth in U.S. manufacturing activity slowed by more than anticipated in July.
The index of activity in the manufacturing sector fell to 58.1 in July after unexpectedly climbing to 60.2 in June, while economists had expected the index to show a more modest drop to 59.5.