Business activity in the United States accelerated in July, supported partly by increased spending linked to the FIFA World Cup and Independence Day celebrations, while manufacturing growth slowed as companies reduced precautionary inventory buildup amid renewed geopolitical uncertainty.
The latest Purchasing Managers’ Index (PMI) surveys from S&P Global indicated that the third quarter began with strong momentum, although economists warned that some of July’s gains may prove temporary due to the limited duration of seasonal boosts and renewed pressure from rising energy prices.
S&P Global reported that the preliminary services PMI climbed to 53.6 in July, its highest level since November, compared with 51.2 in June.
The improvement in services activity helped lift the overall composite PMI to 53.6, marking an eight-month high compared with 51.9 in the previous month.
Meanwhile, the manufacturing PMI slipped slightly to 53.8 from 53.9 in June, reflecting a slower pace of expansion in the industrial sector. Any reading above 50 indicates economic growth.
The figures exceeded some expectations, as economists surveyed by Reuters had forecast a more modest rise in the services PMI to 51.5, while expecting manufacturing activity to reach 54.3.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said US companies reported a strong start to the third quarter, with current data consistent with annualized economic growth of around 2% between July and September.
The US government is expected to release its preliminary estimate for second-quarter gross domestic product next week, with forecasts suggesting growth remained broadly stable at around 2%, compared with 2.1% in the first quarter.
The services sector recorded its fastest growth in new business activity since November, while growth in new orders for manufactured goods weakened to its lowest level in four months.
Employment expanded only modestly across both sectors, suggesting businesses remain cautious despite stronger demand.
Williamson said part of July’s improvement may be short-lived, pointing to temporary support from World Cup-related spending and the upcoming 250th anniversary of US independence celebrations.
He warned that the slowdown in manufacturing growth, combined with weakening inventory accumulation and renewed supply chain pressures, could limit future expansion and weigh on demand.
Recent developments in the Middle East have added uncertainty to the economic outlook, with renewed military tensions involving Iran contributing to disruptions in regional shipping routes.
The closure of traffic through the Strait of Hormuz, a critical global energy route, pushed international crude oil prices toward $100 per barrel, after prices had been near $70 per barrel at the beginning of July.
Average US gasoline prices also moved above $4 per gallon, increasing concerns about inflationary pressures and consumer spending.
Williamson said the latest geopolitical developments could intensify concerns over supply chains and pricing pressures, increasing downside risks for the near-term economic outlook.
Follow the latest news on Google News
