Background on the Service Sector and ISM Index
The United States service sector experienced a slowdown in July, as reported by recent survey data. This decline is attributed to the global industry impacts of President Donald Trump’s tariffs implemented this year.
ISM Index Performance
The ISM (Institute for Supply Management) services index fell slightly to 50.1 points in July, down from 50.8 points in June. Although the figure remains above the 50-point growth threshold, it did not meet the forecasted expectations of 51.5 points.
Concerns Over Trade Tensions
Steve Miller, president of the ISM survey, expressed concern over the continued contraction in the employment index and the faster expansion of the prices index. Both new export and import indices shifted from expansion to contraction territory, signaling that trade tensions are affecting global commerce.
“The most common theme among survey respondents was the impact of tariffs, with a notable increase in basic product prices,” Miller stated.
Business Activity in the Eurozone
In contrast, business activity in the eurozone grew slightly in July compared to June but remained stagnant due to falling demand.
The composite purchases HCOB index for the eurozone, compiled by S&P Global, rose to 50.9 points in July from 50.6 in June.
July’s reading marked a four-month high, but it still lags below the long-term survey average of 52.4 points, reflecting persistent weakness in the 20-country monetary bloc.
Positive Signs in Some Eurozone Countries
Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, noted that “this could be a good summer for service providers. In Italy and Spain, commercial activity increased more forcefully in July compared to the previous month.”
Key Questions and Answers
- What is the ISM index, and why is it important? The ISM index measures economic growth in the services sector. A reading above 50 points indicates expansion, while a reading below 50 points suggests contraction.
- Why are tariffs affecting the service sector? Tariffs imposed by President Trump have increased costs for businesses, leading to reduced growth in the service sector.
- What is the current state of the eurozone’s service sector? The eurozone’s service sector is experiencing stagnation due to falling demand, although there are positive signs in countries like Italy and Spain.
