Here’s the ISM’s presser. Pay close attention to the bolded parts though.
“The NMI® registered 55.7 percent, which is 3.4 percentage points lower than the June reading of 59.1 percent. This represents continued growth in the non-manufacturing sector at a slower rate. There was a notable decrease in the Business Activity Index, which fell to 56.5 percent, 7.4 percentage points lower than the June reading of 63.9 percent. The July figure still reflects growth for the 108th consecutive month, at a slower rate. The New Orders Index registered 57 percent, 6.2 percentage points lower than the reading of 63.2 percent in June. The Employment Index increased 2.5 percentage points in July to 56.1 percent from the June reading of 53.6 percent. The Prices Index increased by 2.7 percentage points from the June reading of 60.7 percent to 63.4 percent, indicating that prices increased in July for the 29th consecutive month. According to the NMI®, 16 non-manufacturing industries reported growth. There has been a ‘cooling off’ in growth for the non-manufacturing sector. Tariffs and deliveries are an ongoing concern. The majority of respondents remain positive about business conditions and the economy.”
Tariffs are the problem here. Now 55.7 is still a good number but it is significantly lower than previous readings. Moreover, the price index is still increasing and is an outlier at 63.4 percent. That combination means potentially slower growth and higher inflation.
Will Q3 be as good as Q2 for the US? It’s beginning to look doubtful.