The Institute for Supply Management (ISM) reported on Wednesday that its non-manufacturing index (NMI) came in at 58.1 in July, which was 1 percentage point higher than the June reading of 57.1 percent. The reading was the highest since February 2019 and represented growth in the services sector for the second straight month after contraction in April and May.

Economists forecast the index to decrease to 55.0 last month. A reading above 50 signals expansion, while a reading below 50 indicates contraction.

Of the 18 manufacturing industries, 15 reported increases last month, the ISM said, adding that respondents remained concerned about the pandemic; however, they were mostly optimistic about business conditions and the economy as businesses continue to reopen.

According to the report, the ISM’s non-manufacturing Business Activity measure rose 1.2 percentage points to 67.2 percent from June’s figure. The New Orders gauge came in at 67.7 percent, 6.1 percentage points higher than June’s reading. The Backlog of Orders Index grew was at 55.9 percent; 4 percentage points higher than June’s reading. Meanwhile, the Employment Index decreased by 1.0 percentage point to 42.1 percent from the June reading and the Prices Index fell by 4.8 percentage points to 57.6 percent, indicating that prices increased in July at a slower rate. The Supplier Deliveries Index registered at 55.2 percent, down 2.3 percentage points from June’s reading.

Commenting on the data, the Chair of the ISM Non-Manufacturing Business Survey Committee, Anthony Nieves, noted, "The past relationship between the NMI and the overall economy indicates that the NMI for July (58.1 percent) corresponds to a 3.3-percent increase in real gross domestic product (GDP) on an annualized basis."