The services index is barely above contraction. Prices are another matter.
Please consider the July 2025 Services ISM® Report On Business® emphasis mine.
Economic activity in the services sector grew in July for the second consecutive month, say the nation’s purchasing and supply executives in the latest Services ISM® Report On Business®. The Services PMI® indicated expansion at 50.1 percent, above the 50-percent breakeven point for the 12th time in the last 13 months.
The report was issued today by Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee: “In July, the Services PMI® registered 50.1 percent, 0.7 percentage point lower than the June figure of 50.8 percent but in expansion territory for the second month in a row. The Business Activity Index remained in expansion in July, registering 52.6 percent, 1.6 percentage points lower than the reading of 54.2 percent recorded in June. This index has not been in contraction territory since May 2020. The New Orders Index also remained in expansion territory in July, recording a reading of 50.3 percent, a drop of 1 percentage point from the June figure of 51.3 percent. The Employment Index was in contraction territory for the second month in a row and the fourth time in the last five months; the reading of 46.4 percent is 0.8 percentage point lower than the 47.2 percent recorded in June.
“The Prices Index registered 69.9 percent in July, a 2.4-percentage point increase from June’s reading of 67.5 percent. The index has exceeded 60 percent for eight straight months, with July’s reading the highest since October 2022 (70.7 percent).
Miller continues, “July’s PMI® level continues to reflect slow growth, and survey respondents indicated that seasonal and weather factors had negative impacts on business. The Employment Index’s continued contraction and faster expansion of the Prices Index are worrisome developments. The New Exports (a 3.2-percentage point decrease in July) and Imports (a 5.8-point drop) indexes, which both moved from expansion to contraction, provided signals that tariff tensions are impacting global trade.
What Respondents Are Saying
- “Anticipation of the final tariff impacts is resulting in delayed planning for next fiscal year purchases.” [Accommodation & Food Services]
- “Higher tariffs are increasing the cost of imported feed ingredients and trace minerals for livestock and poultry feeds. Business and customer concerns over additional cost risk due to additional tariffs.” [Agriculture, Forestry, Fishing & Hunting]
- “Trade uncertainty causing client reevaluation of feasibility for projects in certain sectors, resulting in some delays or cancellations. Public-funded jobs experiencing pullbacks.” [Construction]
- “Summer break for students greatly reduces demand on campus.” [Educational Services]
- “Steady business activity.” [Finance & Insurance]
- “Tariffs are causing additional costs as we continue to purchase equipment and supplies. Though we need to continue with these purchases, the cost is significant enough that we are postponing other projects to accommodate these cost changes.” [Health Care & Social Assistance]
- “Extra purchasing to head off tariffs has leveled off. Expecting decreases in activity in the second half of 2025.” [Mining]
- “Economic uncertainty remains the dominant theme. However, the tariff talk has turned out to be much more bluster than actual policy, and businesses have seemed to tune out the noise. The outlook continues to look incrementally positive.” [Real Estate, Rental & Leasing]
- “Retail results are solid — a little soft before and during Fourth of July week, but then a rebound. We see no reason to believe this won’t continue for the near term.” [Retail Trade]
- “Our business activity is flat. We are not trending up or down. Tariffs are now starting to show up in pricing, and we are seeing increases across the board.” [Transportation & Warehousing]
Diffusion Indexes
ISM is a diffusion index with numbers above 50 indicating expansion and below 50 contraction.
A weakness of diffusion indexes is direction matters more than amount. For example, a business hiring 2 people would offset a business firing 300.
Mish Thoughts
Prices are soaring as backlog of orders collapse, imports collapse, export orders contract, employment dives, and the overall index is barely above contraction.
This smacks of stagflation.
But I have the cure. All we have to do is ask Trump if prices are up 98 straight months and if tariffs are a problem.
He will have answers we all want to hear.
Things That Can’t Possibly Matter
July 31, 2025: No Improvement in the Fed’s Preferred Measure of Inflation for 8 Months
That’s an obvious lie, perpetrated by the BLS to make Trump look bad.
August 1: Payroll Disaster, Jobs Rise 73,000 but Massive Negative Revisions
That is also a lie, and besides Powell and Biden are to blame.
August 2, 2025: Senate OKs a More than Requested $852 Billion in Defense Spending
Bigger deficits? Who care?
August 3, 2025: Trump Puts 93.5 Percent Tariff on Graphite Needed for EV Batteries
Pay more? Doesn’t matter.
July 31, 2025: Real Disposable Personal Income Flat in June, Inflation Eats All Wage Gains
That’s another big lie, this time perpetrated by the folks at the BEA. The BEA is in cahoots with the BLS.
We need to fire them all and depend on Truth Social for the news.
Any questions?
