Following Friday’s startling downward revisions in jobs growth that sent shockwaves through crypto markets, the ISM Services PMI has now started to consistently signal a more sluggish economic pulse than previously assumed.
July’s ISM Services index registered at 50.1, noticeably beneath the anticipated 51.5 mark. Since any figure above 50 signals growth while below points to contraction, this outcome hints at barely sustained expansion.
A Persistent Trend of Deceleration
This isn’t an isolated slip — it marks the third consecutive month showing signs of economic cooling: May recorded 49.9, June nudged up to 50.8, both notably slower than earlier months’ stronger readings.
Adding fuel to concerns of stagflation, the report flagged a spike in the Prices Paid subindex, which soared to a cycle peak of 69.9, underscoring rising costs amid weakening activity.
Insights from Industry Participants
One respondent painted a vivid picture of tariff-driven cost pressures: “Tariffs are causing additional costs as we continue to purchase equipment and supplies … the cost is significant enough that we are postponing other projects to accommodate these cost changes.”
The market’s reaction was far from warm. Bitcoin (BTC) slid from a lofty perch above $114,000, settling near $112,800 — a drop nearing 2% in just a day. Meanwhile, the Nasdaq, which had earlier clawed some gains, flipped into a 0.5% loss.
Should the Fed Act Now or Wait?
Economist Mark Zandi weighed in on Friday’s notable job revisions, cautioning, “The data always suffers big revisions when the economy is at an inflection point, like a recession.”
He further underscored looming risks: “The economy is on the precipice of recession. Consumer spending has flatlined, construction and manufacturing are contracting, and employment is set to fall. With inflation on the rise, it’s tough for the Fed to come to the rescue.”
Voices Calling for Swift Policy Shifts
Veteran strategists at Hoisington Investment Management, Lacy Hunt and Van Hoisington, adopt a more urgent tone. They view tariff-driven inflation as a transitory, first-round effect, emphasizing that the subsequent ripple effects on contraction carry far greater weight.
Summing up their stance, they assert: “The Fed needs to be quickly moving to an accommodative policy. Waiting would be ill advised. The far more critical consideration is the coming contraction in global economic activity.”
Contextual Data Snapshot
According to multiple economic sources, the US services sector accounts for roughly 70% of GDP, making the ISM Services PMI a vital indicator of overall economic health. The 50.1 reading marks one of the lowest figures in the past year, reflecting a trend that has spanned several months and signaled caution to investors and policymakers alike.