The Markit Flash Service PMI now sits at 50.9, barely above contraction. This is the weakest rise in five months.

Service Sector Activity

Key Findings

• Growth of activity eases to five-month low in July
• New orders and employment rise again
• Business sentiment picks up following dip in June

July data suggested that growth in the U.S. service sector remained muted, with activity rising at the weakest pace in the current five-month sequence of expansion. A slower increase in new business was also recorded. On a more positive note, the rate of job creation picked up slightly and business sentiment improved markedly from June’s record low. On the price front, slower increases were registered for both input costs and output prices during the month.

At 50.9 in July, the seasonally adjusted Markit Flash U.S. Services PMI™ Business Activity Index was down from 51.4 in June and pointed to a slight expansion in activity. The latest increase was the weakest in the current five-month sequence of growth. While some panelists reported that activity had been raised in response to new orders, others mentioned that subdued economic conditions had dampened activity.

Business confidence rebounded to the highest since the start of the year in July, after having hit a record low in the previous month. Respondents noted business expansion plans and hopes for improving economic conditions. Some panelists expected that activity would pick up following the presidential election later this year.

It will be interesting to see if divergences with ISM continue or even widen.

The Markit PMI readings were already well below ISM numbers, and this report worsened. The last services ISM reading jumped from 52.9 to 56.5. For details see my July 6 article PMI Services Essentially Flat, Non-Manufacturing ISM Jumps Huge.

If the divergence continues, one set of numbers is wrong.

Mike “Mish” Shedlock