The number: The Institute for Supply Management’s nonmanufacturing, or services, index slowed to a reading of 53.7% in July from 55.1% in June, the slowest reading since August 2016. The index stood at 59.7% in February.
Consensus estimates of economists polled by MarketWatch were for a reading of 55.5% in July.
A related gauge from IHS Markit, its U.S. services PMI, rose to 53 in July, the fastest pace in three months.
What happened: Components for new orders, production, prices and backlogs were among those that declined in July. The employment gauge increased. Imports rose sharply while exports declined.
Big picture: The rate of growth in the services sector continues to cool off. Respondents indicated concerns related to tariffs. Comments were generally mixed about business conditions. One oil and gas industry contact said companies in the sector were cautious given the volatility in oil prices. The separate ISM factory index fell to 51.2 in July, the slowest since September 2016.
What are they saying? “Non-manufacturing remains stronger than manufacturing, consistent with non-manufacturing being less exposed to weakening in foreign demand, but it is showing slowing nonetheless,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics.
Market reaction: Stocks dropped like a stone at the open as intensified U.S. -China trade tensions spooked investors. The drop in the ISM seemed to add to the market’s woes. The Dow Jones Industrial Average DJIA, -2.71% was recently down 590 points in late-morning trading.