U.S. Services PMI Rises to 55.2 on Strong Growth Momentum

Recent PMI data has painted a strong picture of U.S. economic growth in the third quarter of 2025, with the services sector playing a central role in driving expansion. S&P Global’s preliminary July U.S. Services PMI rose to 55.2, a seven-month high, and significantly higher than June’s 52.9. This marked acceleration suggests a robust start to the quarter, with business activity expanding at a solid pace [11]. The services sector, which accounts for roughly 70% of U.S. economic activity, continues to show resilience, offsetting a slowdown in manufacturing.

The July PMI reading implies that the U.S. economy may be on track for stronger-than-expected growth, with the average GDP growth rate in the first half of 2025 at 1.25%, and projections now pointing to a potential doubling of that pace to around 2.5% [11]. The upward momentum in the services sector is seen as a positive indicator that the economy remains on a growth trajectory despite some headwinds.

The strong PMI data has intensified speculation around the Federal Reserve’s next move. Market expectations for a 25 basis point rate cut at the Fed’s September meeting now stand at 88.1%. San Francisco Fed President Mary Daly has hinted that the time for rate cuts is approaching, citing easing inflation and signs of labor market weakness [9]. This has fueled a rebound in stock index futures, with the S&P 500 and Nasdaq 100 E-Mini contracts rising as investors anticipate accommodative monetary policy.

Corporate earnings have also contributed to a more optimistic outlook. High-profile companies such as Palantir Technologies, DuPont, and Pfizer have exceeded expectations, bolstering investor confidence. The S&P 500 is currently on track for a 9.1% year-over-year profit increase, well above the 2.8% forecast by analysts [1]. The coming days will see reports from firms like Advanced Micro Devices, Caterpillar, and Amgen, which could provide further insight into the overall health of the corporate sector and its contribution to economic momentum.

The upcoming release of the ISM Non-Manufacturing PMI and S&P Global Services PMI later in the week will offer additional clarity on the direction of the services sector. Economists are expecting readings of 51.5 and 55.2, respectively [9]. A continued rise in these indicators would reinforce the view that the U.S. economy is entering the second half of the year on a stable and expansionary path.

Meanwhile, the U.S. trade deficit is expected to narrow to -$62.60 billion in June, from -$71.50 billion in May, signaling a modest improvement in external balances [1]. While trade-related uncertainties remain, particularly in U.S.-China negotiations and potential tariff changes, the strong PMI readings have provided a degree of stabilization in market sentiment.

In the bond market, yields on the 10-year U.S. Treasury have risen slightly to 4.212%, reflecting a careful balance between growth optimism and the Fed’s inflation-fighting stance [1]. Traders are positioning for a mix of continued economic expansion and an eventual shift in monetary policy toward easing.

Overall, the PMI data underscores the resilience of the U.S. economy, particularly in the services sector, which continues to drive growth despite challenges in manufacturing and employment. As the Fed continues to monitor key economic indicators, the upcoming PMI releases and corporate earnings reports will remain crucial for both policymakers and investors seeking to gauge the economy’s trajectory.

Source:

[1]https://www.farmerswin.com/news/story/33879757/stock-index-futures-gain-on-strong-earnings-and-fed-rate-cut-bets

[9]https://www.rttnews.com/3562113/wall-street-might-open-marginally-higher.aspx

[11]https://www.tradingview.com/news/forexlive:9da9e6ea7094b:0-newsquawk-week-ahead-highlights-include-us-ism-svs-pmi-boe-canada-jobs-china-trade/