The numbers: An ISM barometer of business conditions at companies such as restaurants and hotels rose to a three-month high of 56.7% in July, suggesting the economy continues to expand in the face of growing headwinds.
Orders and production rose, hiring improved and intense inflationary pressures eased somewhat last month, business executives told the Institute for Supply Management.
Economists polled by The Wall Street Journal had expected the index to drop to 54% from 55.3% in June.
Numbers over 50% are viewed as positive for the economy.
A similar ISM survey of American manufacturers also showed business activity slowing to a more than two-year low in July, however.
Big picture: Most companies are still growing and hiring, the ISM surveys found, but a whiff of recession is also in the air.
The Federal Reserve is raising interest rates sharply to squelch the worst inflation in almost 41 years, but higher rates usually slow the economy and sometimes can even trigger a recession.
“Can feel the economy weakening. Clients are making appropriate moves in anticipation of a recession,” an executive at a management-consulting company told the Institute for Supply Management.
Yet most businesses said they were still trying to hire, a sign of confidence in the economy. “Hiring demand remains robust in most industry sectors,” a technology executive said.
Looking ahead: “The recovery’s best days are clearly in the rear-view mirror, but this doesn’t mean an economic downturn has begun,” said lead US economist Oren Klatchkin of Oxford Economics.
“The July ISM reports suggest that the overall economy is still holding up well,” said senior US economist Michael Pearce of Capital Economics.
Market reaction: The Dow Jones Industrial Average DJIA,
and S&P 500 SPX,
rose in Wednesday trades.
Credit: www.marketwatch.com /