Growth in the U.S. services sector unexpectedly strengthened to a three-month high in July on firmer business activity and orders, easing concerns of a broader economic slowdown.
The Institute for Supply Management’s index rose to 56.7 from 55.3 a month earlier, data showed Wednesday.
Readings above 50 indicate growth and the July result exceeded the most-optimistic forecast in a Bloomberg survey of economists. The median projection was 53.5.
The group’s gauge of business activity, which parallels the ISM factory production index, rose to the highest level since the start of the year, while new orders growth was the healthiest in four months.
The services data stand in contrast to a separate ISM report on Monday that showed manufacturing grew at the slowest pace in just over two years as more factories dialed back production in the face of shrinking orders and rising inventories.
Goods-demand has fallen as consumers shift more of their spending to services in a pandemic reset.
Thirteen services industries reported growth last month, led by mining and real estate, while three indicated declining performance.
Supplier delivery times for services continued to lengthen, though at the slowest pace since the beginning of 2021, helping firms make progress on backlogs.
The measure of unfilled orders reversed some of the sharp increase in June.
A measure of prices paid by service providers fell to 72.3, the lowest level since February of last year, from 80.1.
The 7.8 point-drop coincides with an even larger pullback in prices paid by goods-producers and suggests an easing of inflationary pressures amid declining fuel costs.
A gauge of inventories at service providers dropped to its lowest point since October, showing a faster reduction in stockpiles.
A separate measure of inventory sentiment indicated respondents view their existing supplies and materials as better in line with demand.
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