Full Breakdown
U.S. Business Activity Rises in July on Service Surge, Yet Manufacturing Slows Amid Supply-Chain Strains
7/25/2026, 11:30:28 AM
Background & Context
July’s economic pulse was shaped by two forces. Domestic demand for hospitality and related services surged as the FIFA World Cup captured American attention and Independence Day celebrations spurred additional spending. At the same time, the renewed U.S.–Israeli-led conflict with Iran intensified in the Persian Gulf, closing the Strait of Hormuz and pushing Brent crude futures up 36% from $70.85 to $96.62 per barrel since July 2. The energy-price shock revived concerns about supply-chain delays and inflationary pressure.
Data & Statistics
- Service sector PMI: S&P Global flash services PMI rose to 53.6, the highest reading since November 2025.
- Manufacturing PMI: Manufacturing PMI slipped to 53.8, the lowest level since March 2024.
- Composite PMI: Overall flash composite PMI reached 53.6, an eight-month high.
- Employment: Both services and manufacturing firms reported modest hiring gains, the first rise in employment in three months.
- Supply-chain delays: Manufacturers said supplier delivery times lengthened at the fastest pace since August 2022.
- Input-cost inflation: Overall input-cost inflation hit a 14-month high, driven largely by higher energy and shipping costs.
- Consumer pricing: Selling prices rose at the sharpest rate in nearly four years, with gasoline prices climbing back above $4 per gallon.
Official Statements & Responses
Chris Williamson, chief business economist at S&P Global Market Intelligence, said the July data are consistent with GDP expanding at roughly a 2.0% annualized pace in the July-September quarter, matching Reuters-polled economist forecasts.
Oliver Allen, senior U.S. economist at Pantheon Macroeconomics, observed that the economy has shown resilience despite the oil-price surge, but cautioned that “the cracks will show soon” as households no longer receive unusually large tax refunds and the energy shock intensifies.
The U.S. government is slated to release its first estimate of second-quarter GDP next week, with preliminary forecasts expecting growth to hold steady near 2.0%.
Verbatim Quotes
- “July saw a concerning intensification of supply chain delays and accompanying renewed upturn in price pressures, constraining growth and subduing demand,” — Chris Williamson
- “We expect the cracks to show soon, however, given that households are no longer receiving bigger-than-usual tax refunds, and the energy shock is intensifying again,” — Oliver Allen
What’s Next
The upcoming GDP estimate will provide the first official gauge of whether the July upturn translates into sustained quarterly growth. Analysts will also watch oil-price movements and any further escalation in the Iran conflict, as both factors could amplify supply-chain bottlenecks and price pressures in the coming months.
