U.S. Services Sector Heats Up

Index Shows Activity Continued At 4.5 Year High In July

U.S. Services Sector Heats UpNow may be a good time for distributors to start prospecting with clients in the services industry. A just-released index showed that activity in the U.S. services sector continued at a 4 ½-year high in July. “Service sector companies continue to perform strongly against post-recession trends,” said Chris Williamson, chief economist at financial data firm Markit.

Compiled by Markit, the Purchasing Managers Index was 61 in July, the same as in June and above forecasts that called for a drop to 59.8. The June tally was the highest since the survey began in October 2009. Anything above 50 indicates the sector is experiencing economic expansion.

Nonetheless, the survey found the pace of hiring by services firms was down in July. The July reading on the employment index was 52.8, a drop off from the prior month’s 56.1, which was the fastest rate recorded. The index’s measure of new business activity in the sector dipped in July too, but that was also after a record June. "While a cyclical upswing appears underway across the service sector, the latest survey provides some indication that a smoother ride is not yet fully entrenched," said Williamson.

Still, the overall strong showing in the services and manufacturing sectors, which Markit also tracks, bodes well for the American economy, Williamson said. Markit's final composite PMI, which takes into account its manufacturing and services indexes, held nearly steady in July (60.9) following a record-setting June (61). “Overall the latest manufacturing and services PMI surveys suggest that the U.S. economy has enjoyed a strong start to the second half of 2014,” said Williamson.