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Recap: District Bank surveys for the service sector point to modest-to-moderate growth

The four District Bank surveys for the service sector have all reported for July. Unlike those for the manufacturing sector, the numbers are consistent with modest-to-moderate growth and signal that the ISM Non-Manufacturing Index for July at 10:00 ET on Monday, August 5 could nudge up from the 55.1 reading of June.

The index for service sector revenues in the Richmond Fed survey has the strongest correlation with the ISM measure. It was down to 11 in July after 16 in June. It seems to be consistent with a middling trend for growth for services in the Richmond District. While not the headline numbers, revenues in other surveys took a turn higher. Dallas saw the index at 20.9 in July, the highest since 20.8 in November. Service sector revenues in the Philadelphia report rose to 22.5 in July after 17.0 in June.

The other surveys pointed to improved conditions in July. The general business activity index for the Dallas Fed’s Texas Service Sector Outlook rose to 4.7 in July from 3.2 in the prior month and hinted at more stable, if unspectacular expansion after the see-sawing of recent months. The New York Fed’s Business Leaders Survey activity index rose to 9.7 in July from 5.8 in the prior month and is also reflecting a modest growth trend. The Philadelphia Fed’s Non-Manufacturing Index for July jumped to 21.4 after 8.2. While not at the heights seen in 2018, it is definitely at a pace that points to respectable expansion.

Because of the difference in the construction of the surveys, it is not possible to create an equivalent index to the ISM number. However, the tone indicates that unlike the manufacturing sector, services are seeing more even and sustained growth in spite of some of the challenges associated with costs and the supply chain while trade and tariff policy is unsettled.

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