Services PMI^® at 50.1%

July 2025 Services ISM^® Report On Business^®

Business Activity Index at 52.6%
New Orders Index at 50.3%
Employment Index at 46.4%
Supplier Deliveries Index at 51%

(Tempe, Arizona) — Economic activity in the services sector grew in July for the second consecutive month, say the nation’s purchasing and supply executives in the latest Services ISM^® Report On Business^®. The Services PMI^® indicated expansion at 50.1 percent, above the 50-percent breakeven point for the 12th time in the last 13 months.

The report was issued today by Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management^® (ISM^®) Services Business Survey Committee: “In July, the Services PMI^® registered 50.1 percent, 0.7 percentage point lower than the June figure of 50.8 percent but in expansion territory for the second month in a row. The Business Activity Index remained in expansion in July, registering 52.6 percent, 1.6 percentage points lower than the reading of 54.2 percent recorded in June. This index has not been in contraction territory since May 2020. The New Orders Index also remained in expansion territory in July, recording a reading of 50.3 percent, a drop of 1 percentage point from the June figure of 51.3 percent. The Employment Index was in contraction territory for the second month in a row and the fourth time in the last five months; the reading of 46.4 percent is 0.8 percentage point lower than the 47.2 percent recorded in June.

“The Supplier Deliveries Index registered 51 percent, 0.7 percentage point higher than the 50.3 percent recorded in June. This is the eighth consecutive month that the index has been in expansion territory, indicating slower supplier delivery performance. (Supplier Deliveries is the only ISM^® Report On Business^® index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.)

“The Prices Index registered 69.9 percent in July, a 2.4-percentage point increase from June’s reading of 67.5 percent. The index has exceeded 60 percent for eight straight months, with July’s reading the highest since October 2022 (70.7 percent).

“The Inventories Index was in expansion territory in July for its second month in a row, registering 51.8 percent, a decrease of 0.9 percentage point from June’s figure of 52.7 percent. The Inventory Sentiment Index expanded for the 27th consecutive month, registering 53.2 percent, down 3.9 percentage points from June’s figure of 57.1 percent. The Backlog of Orders Index was in contraction territory for the fifth month in a row, registering 44.3 percent in July, a 1.9-percentage point increase from the June figure of 42.4 percent.

“Eleven industries reported growth in July, one more than in June. The Services PMI^® has expanded in 58 of the last 62 months dating back to June 2020. The July reading of 50.1 percent is 2.2 percentage points below the 12-month average reading of 52.3 percent.”

Miller continues, “July’s PMI^® level continues to reflect slow growth, and survey respondents indicated that seasonal and weather factors had negative impacts on business. The Employment Index’s continued contraction and faster expansion of the Prices Index are worrisome developments. The New Exports (a 3.2-percentage point decrease in July) and Imports (a 5.8-point drop) indexes, which both moved from expansion to contraction, provided signals that tariff tensions are impacting global trade. However, continued expansion in the Business Activity and New Orders indexes, together with a slight improvement in the Backlog of Orders Index, highlight the resilience of the U.S. services sector. Some respondents noted increased transportation congestion that supported the ‘slower’ Supplier Deliveries Index reading, another sign that activity levels are expanding. The most common topic among survey panelists remained tariff-related impacts, with a noticeable increase in commodities listed as up in price.”

INDUSTRY PERFORMANCE

The 11 services industries reporting growth in July — listed in order — are: Transportation & Warehousing; Wholesale Trade; Finance & Insurance; Retail Trade; Other Services; Management of Companies & Support Services; Public Administration; Real Estate, Rental & Leasing; Information; Utilities; and Health Care & Social Assistance. The seven industries reporting a contraction in the month of July — listed in order — are: Accommodation & Food Services; Construction; Mining; Educational Services; Agriculture, Forestry, Fishing & Hunting; Arts, Entertainment & Recreation; and Professional, Scientific & Technical Services.

WHAT RESPONDENTS ARE SAYING

• “Anticipation of the final tariff impacts is resulting in delayed planning for next fiscal year purchases.” [Accommodation & Food Services]
• “Higher tariffs are increasing the cost of imported feed ingredients and trace minerals for livestock and poultry feeds. Business and customer concerns over additional cost risk due to additional tariffs.” [Agriculture, Forestry, Fishing & Hunting]
• “Trade uncertainty causing client reevaluation of feasibility for projects in certain sectors, resulting in some delays or cancellations. Public-funded jobs experiencing pullbacks.” [Construction]
• “Summer break for students greatly reduces demand on campus.” [Educational Services]
• “Steady business activity.” [Finance & Insurance]
• “Tariffs are causing additional costs as we continue to purchase equipment and supplies. Though we need to continue with these purchases, the cost is significant enough that we are postponing other projects to accommodate these cost changes.” [Health Care & Social Assistance]
• “Extra purchasing to head off tariffs has leveled off. Expecting decreases in activity in the second half of 2025.” [Mining]
• “Economic uncertainty remains the dominant theme. However, the tariff talk has turned out to be much more bluster than actual policy, and businesses have seemed to tune out the noise. The outlook continues to look incrementally positive.” [Real Estate, Rental & Leasing]
• “Retail results are solid — a little soft before and during Fourth of July week, but then a rebound. We see no reason to believe this won’t continue for the near term.” [Retail Trade]
• “Our business activity is flat. We are not trending up or down. Tariffs are now starting to show up in pricing, and we are seeing increases across the board.” [Transportation & Warehousing]

ISM^® SERVICES SURVEY RESULTS AT A GLANCE COMPARISON OF ISM^® SERVICES AND ISM^® MANUFACTURING SURVEYS*
JULY 2025

Services ISM^® Report On Business^® data is seasonally adjusted for the Business Activity, New Orders, Employment and Prices indexes. Manufacturing ISM^® Report On Business^® data is seasonally adjusted for New Orders, Production, Employment and Inventories indexes.
**Number of months moving in current direction.