From the Institute for Supply Management (bolds are mine; most paragraph breaks added by me):
Economic activity in the non-manufacturing sector grew in July for the 78th consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.
… The NMI® registered 55.5 percent in July, 1 percentage point lower than the June reading of 56.5 percent. This represents continued growth in the non-manufacturing sector at a slower rate.
The Non-Manufacturing Business Activity Index decreased to 59.3 percent, 0.2 percentage point lower than the June reading of 59.5 percent, reflecting growth for the 84th consecutive month, at a slightly slower rate in July. The New Orders Index registered 60.3 percent, 0.4 percentage point higher than the reading of 59.9 percent in June.
The Employment Index decreased 1.3 percentage points in July to 51.4 percent from the June reading of 52.7 percent. The Prices Index decreased 3.6 percentage points from the June reading of 55.5 percent to 51.9 percent, indicating prices increased in July for the fourth consecutive month. According to the NMI®, 15 non-manufacturing industries reported growth in July. The majority of the respondents’ comments reflect stability and continued growth for their respective companies and a positive outlook on the economy.
The 15 non-manufacturing industries reporting growth in July — listed in order — are: Arts, Entertainment & Recreation; Educational Services; Accommodation & Food Services; Real Estate, Rental & Leasing; Retail Trade; Utilities; Health Care & Social Assistance; Public Administration; Finance & Insurance; Management of Companies & Support Services; Transportation & Warehousing; Wholesale Trade; Construction; Information; and Professional, Scientific & Technical Services. The three industries reporting contraction in July are: Other Services; Agriculture, Forestry, Fishing & Hunting; and Mining.
Backlog of Orders went into expansion.
There’s nothing wrong with this report — until you try to explain how it can exist in the same universe with 1 percent annualized GDP growth. Then, everything is wrong. It is overwhelmingly likely that the report, like its manufacturing counterpart, is a product of positive selection. That is, the companies doing well are glad to crow about it, while the companies that aren’t have far more urgent things to do than fill out ISM surveys — or have gone out of business.
Markit’s PMI index is at 51.4, a number that seems far more credible in the circumstances.