The Institute for Supply Management reported that U.S. services activity remained almost unchanged in July with a 50.1 index reading which barely exceeded the 50 threshold for growth. The economic community predicted a 51.5 reading but received a 50.1 result instead.
The services sector experienced a decline in new orders which reached 50.3 while export orders entered negative territory for the fourth time during the last five months. The services sector employment index reached 46.4 which represents the lowest level since March and indicates a weakening labor market following major revisions to previous employment data.
The upcoming August 7 tariff implementation of 10% to 41% on multiple imported goods will cause the economy to slow down. The average U.S. tariff rate has reached 18.3% according to Yale’s Budget Lab which represents the highest level since 1934.
The ISM prices-paid index reached its highest level in almost three years at 69.9. The combination of rising tariffs with their potential to increase inflation and reduce demand creates a risk of stagflation according to economists.
