US ISM nonmanufacturing index surges in July

The ISM nonmanufacturing index rose to 60.3 in July (previous-56.0), outstripping estimate (56.5) and consensus expectations (56.2) for a modest monthly increase. The stronger-than-expected survey reading on service sector activity was broad based. Business activity rose to 64.9 (previous-61.5) and new orders advanced to 63.8 (previous: 58.3).

"Together these improvements suggest demand for service is healthy and should remain so in the near term. Export demand helped lead the improvement in orders, with the non-seasonally adjusted index for export orders (56.5, previous-52.0) rising to the strongest level since March", notes Barclays.

Imports rose as well on the month (50.5, previous-48.0), though more modestly. The employment index surged to 59.6 (previous-52.7) in July, the highest reading in a decade, this contrasts with the July ADP employment numbers released this morning that showed a deceleration in service sector hiring.

"We view the broad-based nature of the improvement in the nonmanufacturing ISM as encouraging and see the US service sector on a positive trajectory in Q3", says Barclays.