Christopher Combs
Chief Investment Officer
Silicon Valley Capital Partners
August 5, 2026
The latest ISM Services report reinforces our view that the U.S. economy continues to expand at a healthy pace, although inflationary pressures remain an important consideration for monetary policy.
Three Key Takeaways
- Services demand remains the backbone of the U.S. economy.
The ISM Services PMI edged up to 54.1 in July, remaining comfortably above the 50-point expansion threshold. Stronger new orders and the highest business activity reading in five months suggest that consumer and business demand remain resilient despite higher interest rates. - Inflation pressures have not fully subsided.
The Prices Paid Index rose sharply to 70.3, reflecting higher energy, transportation, and input costs. While geopolitical events contributed to recent increases, elevated service-sector inflation suggests the Federal Reserve will continue to monitor pricing trends carefully. - The Federal Reserve still faces a balancing act.
The report presents mixed signals. Business activity remains solid, but service-sector employment contracted at its fastest pace since March. A resilient economy argues against aggressive easing, while slowing hiring supports a patient policy approach. We believe incoming inflation and labor market data will remain the primary drivers of the Fed’s next policy decision.
Overall, the July report supports the view that the U.S. economy continues to grow, led by a resilient services sector. While inflation has moderated from its peak, persistent price pressures—particularly within services—suggest monetary policy is likely to remain data dependent through the remainder of 2026.
References
Bloomberg News (2026) US Services Activity Continues to Expand on Resilient Demand. Bloomberg Terminal, 5 August 2026.
Institute for Supply Management (2026) Services ISM® Report on Business®, July 2026. Institute for Supply Management.