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US ISM Services PMI holds at 54.1 as employment cools

The Employment Index fell to 47.4, while the Prices Index rose to 70.3 for a 110th straight month of higher input costs, keeping the Fed cautious on inflation.

Reported · Written up by our desk · Central Banks

The US ISM Services PMI edged up to 54.1 in July from 54.0, keeping the services sector in expansion and pointing to continued economic growth, even as labor-market cracks show through, according to Action Forex.

Beneath the steady headline, the Employment Index dropped sharply to 47.4 from 51.2, slipping back into contraction after a month of growth. Survey respondents cited modest workforce reductions, including firms pointing to AI adoption and ongoing job shifts to lower-cost overseas locations.

Inflation pressures moved higher, with the Prices Index climbing to 70.3 from 67.7. The report noted this was the 110th consecutive month of rising input costs, with the 12-month average reaching the highest level since April 2023.

Action Forex said the mix of softer hiring and firmer prices leaves the Federal Reserve facing a familiar dilemma, where slowing employment supports patience, but persistent cost pressures could keep policymakers cautious about declaring inflation progress complete.

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