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The numbers: IHS Markit said its U.S. flash manufacturing purchasing managers index rose to 51.3 in July from 49.8 in the previous month.
Meanwhile, the flash services purchasing managers index rose only to 49.6 from 47.9 in June.
Any reading above the 50 neutral mark indicates improving conditions, while readings below that measure indicates contraction. The flash estimate is typically based on approximately 85%–90% of total survey responses each month.
What happened: New businesses were weighed down by reports on challenging demand conditions, especially among service providers. Service sector firms also registered a sharper decline in new orders.
Big picture: The U.S. economy is experiencing the first ever recession driven by the services sector. And economists are concerned because some key service sectors like travel, restaurants, and entertainment are not expected to recover soon given the pandemic. Manufacturing is slowing getting on its feet but still is experiencing headwinds.
What IHS Markit said: “The lack of growth is a disappointment,’ said Chris Williamson, chief business economist at IHS Markit.
Market reaction: U.S. equity benchmarks opened lower on Friday. The S&P 500 Index SPX, -0.29% was down 22 points at the start of trading on Friday.
