By Xavier Fontdegloria

Activity in the U.S. services sector cooled in July compared with the previous months as the growth in new business softened, according to data from IHS Markit released Wednesday.

The final U.S. Services Purchasing Managers' Index for July stood at 59.9, down from 64.6 in June and virtually higher than the flash estimate of 59.8. Economists polled by The Wall Street Journal expected the final services PMI to come in at 59.8.

The reading signals a strong and broad-based growth rate for the services sector, as it is well above the 50-point threshold that separates expansion from contraction. However, it also suggests a slowdown compared with previous months, as the July reading is a five-month low.

"The pace of U.S. economic growth cooled in July ... but remained impressively strong to suggest that gross domestic product will rise robustly again in the third quarter," said Chris Williamson, chief business economist at IHS Markit.

Stimulus measures and reopening of the economy continued to boost demand for goods and services, most notably among households and especially in consumer-facing services such as travel and hospitality, he said.

New business rose fast in July supported by a pick-up in client demand, although the expansion pace softened. Some companies reported that capacity constraints hampered activity growth, particularly shortages of suitable candidates for open positions.

As a result of challenges finding staff, the rate of job creation also eased, IHS Markit said.

On the price front, both costs and prices passed on to customers increased at a substantial pace in July, but the rate of increase softened.

"It is encouraging to note that the overall rate of increase of selling prices for goods and services continued to moderate from May

's recent peak," Mr. Williamson said.

Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com

(END) Dow Jones Newswires

August 04, 2021 10:17 ET (14:17 GMT)

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