The 64.1 seen in the ISM-S index in July is positive, reflecting the strong expansion in the services sector. There is a serious jump from the 60.1 index value in June. We can also talk about a reflection in the sense that the risk of variants hasn't been around much yet. Because instead of slowing down, we see a service sector gaining serious momentum. This is also positive for the demand component, as this is driven by both the industry's job creation and the growing demand for service providers. In other words, as there is mobility, individuals benefit from services and spend more.
If we look at the sub-items; prices rose from 79.5 to 82.3, indicating high inflationary pressures. In terms of the service sector, it can be explained by the post-pandemic demand effect rather than the input effect. Therefore, the increases here will be reduced over time. The employment index rose from 49.3 to 53.8. This is also positive in the context of employment in the sector shifting from a contraction to an increase. The service sector has reached a level that will add employment again with the increase in activity, with the effect of opening and vaccination. The rise in new orders from 62.1 to 63.7 reflects increased customer demand, therefore more activity.
Ensuring resolution in the limited labor pool is important in terms of sustainability. On the other hand, the main challenge of inflation comes from material shortages and logistical problems. So for the Fed, this is challenging enough. On employment, details from flash PMIs and ISM are positive. It is likely that the service sector in NFP will increase employment momentum, just as ADP has shown. The growth of the employment index in this area is in line with the expansion of the sector, but more momentum may be needed. This reveals the need for the idle workforce to become more active.
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