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revision: A previous article cited incorrect data for the July ISM Service PMI. The following article contains patch numbers.
(Kitco News) – The gold market continues to see strong technical selling pressure but has largely ignored stronger-than-expected activity in the US services sector, according to the latest report from the Institute for Supply Management (ISM).
On Wednesday, the ISM said its services sector index showed a reading of 56.7% for July, up from June’s reading of 55.3%. The data beat expectations, with expectations calling for a drop to 53.5%.
Readings above 50% in these prevalence indicators are a sign of economic growth and vice versa. The higher or lower the index is 50%, the higher or lower the rate of change.
“Growth continues – at a faster rate – for the services sector, which has expanded for the past 150 months except for two. The slight increase in service sector growth is due to increased business activity and new orders,” said Anthony Neves, Chair of Theism Services Business Survey Committee.
The gold market is not seeing much movement in reaction to the latest economic data. December gold futures were trading at $1,776.80 an ounce, down 0.72% on the day.
Looking at the components of the report, the business activity index jumped to 59.9%, up from the June reading of 56%. The new orders index rose to 59.9% compared to the June reading of 55.6%.
However, the report shows slowing momentum in the labor market. The employment index remained in contraction territory at 49.1%, up from the June reading of 47.4%.
Although activity in the services sector remains strong, inflation pressure appears to be easing. The report stated that the price index fell to 72.3% from the previous reading of 80.1%.
Michael Pierce, chief US economist at Capital Economics, said the latest service sector data will help ease some recession fears.
“In stark contrast to the weaker S&P Global Services survey in the US, ISM reports for July that the overall economy is still holding up well. With borrowing costs lower than their peak in June, lower gasoline prices are likely to drive up incomes,” he said. Realistically available, the immediate outlook for services looks a bit brighter.
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