The latest ISM Services Index paints a concerning picture of the economy.
The index dropped to 50.1 in July, barely holding onto expansion territory and missing all economist forecasts. This points to a significant slowdown in the services sector.
Drilling down into the details, the Employment Index fell to 46.4, contracting for the fourth time in five months. This signals a softening in hiring activity. Meanwhile, the Prices Paid Index jumped to its highest level since October 2022, fueled by tariff-related cost pressures.
New Orders are near stagnation at 50.3, showing weakening demand, while inventory sentiment is at its lowest since October. The big picture is that uncertainty around tariffs is creating headwinds for planning, sourcing, and pricing across several industries.
This data aligns with the recent BLS hiring revisions, reinforcing the view that the labor market will remain soft throughout the summer.
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