Via brookings.edu
US services activity remains strong in July as input costs rise, sending mixed signals for crypto markets
The ISM services PMI held above 54% for another month, but surging input prices and contracting employment paint a complicated picture for Fed watchers and risk asset traders.
The US services sector posted its 25th consecutive month of expansion in July. But under the hood, the picture is messier than the headline number suggests, with input costs climbing and employment slipping into contraction territory.
The ISM Services PMI came in at 54.1% for July, a hair above June’s 54.0% reading but below the 54.5% that economists had penciled in. Any reading above 50 signals expansion, and the services sector has now stayed in growth territory for over two years straight.
Strong activity, rising prices, fewer workers
The Business Activity Index jumped to 59.1%, climbing 3.7 points from the prior month.
New Orders rose to 57.2%, up 2.1 points from June.
The Employment Index dropped to 47.4%, crossing into contraction territory.
The Prices Paid Index surged to 70.3, up from 67.7 in June. The jump was driven in part by petroleum prices and tariff-related cost increases.
What the Fed is watching
The Prices Paid Index at 70.3 represents a visible re-acceleration of inflation pressures in the services sector. When businesses report paying significantly more for inputs, those costs eventually get passed to consumers.
Why crypto traders should care
CoinDesk has noted that Bitcoin experienced price volatility in the immediate aftermath of the report’s release, as traders recalibrated their expectations around the timing and magnitude of potential rate cuts.
ISM Chair Steve Miller remarked on the presence of ongoing discussions related to tariffs and Middle East tensions, while also noting boosts to activity from major events like the FIFA World Cup, which contribute positively to the services sector.