What were the key PMI readings for U.S. services and manufacturing in July, and how did they compare to expectations?

S&P Global's flash services Purchasing Managers' Index rose to 53.6 in July—the highest since November—up from 51.2 in June, while the manufacturing PMI eased to 53.8 from 53.9 in June, marking the slowest pace since March. The Composite Output Index also climbed to 53.6, an eight-month high, from 51.9 in June. These readings contrasted with economists' Reuters-poll expectations of a modest acceleration in the services PMI to 51.5 and a further rise in the manufacturing PMI to 54.3.

According to S&P Global, what temporary factors boosted U.S. business activity in July, and why might the upturn not signal a sustained improvement?

The July uptick in U.S. business activity was partly driven by one-off factors including spending linked to the FIFA World Cup and USA 250 anniversary activities—especially boosting hospitality demand—as well as Independence Day-related consumption. However, S&P Global cautioned that this improvement may be short-lived, citing fading precautionary stock building in manufacturing, intensifying supply chain delays, renewed upward pressure on prices, and the recent escalation of the U.S.-Israeli-led war with Iran—which has disrupted traffic in the Strait of Hormuz, pushed oil prices back near $100 a barrel, and lifted U.S. gasoline prices above $4 a gallon—thereby exacerbating supply chain and price concerns and raising downside risks to the near-term economic outlook.

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