US S&P Services PMI drops to 47 in July from 52.6 expected

Business activity in the services sector in the United States contracted in early July, with the S&P Global Services Index dropping to 47 from 52.7 in June. This reading came in much lower than the market expectation of 52.6.

Further details from the release revealed that the manufacturing PMI fell slightly to 52.3 from 52.7 and the composite PMI fell to 47.5 from 52.3.

Commenting on the data, “preliminary PMI data for July points to a worrying deterioration in the economy,” said Chris Williamson, chief economist at S&P Global Market Intelligence.

“Excluding the months of pandemic-related lockdowns, output is falling at a pace not seen since 2009 amid the global financial crisis, with survey data indicating GDP falling at an annualized rate of around 1%” , Williamson said. “Manufacturing has stalled and the rebound in the service sector from the pandemic has reversed as the tailwind of pent-up demand has been overcome by the rising cost of living, rising interest rates and the growing bleakness of the economic outlook.”

Market reaction

The Dollar came under heavy selling pressure after the report and the US Dollar Index was last seen losing 0.3% on the day at 106.30.