Business at U.S. service companies picked up sharply in July, and executives grew more optimistic about the months ahead, surveys released Wednesday showed, a sign the economy entered the second half of the year on firmer footing than expected.
The service sector—restaurants, banks, hospitals, truckers, software firms and the rest of the roughly two-thirds of the economy that doesn’t make physical products—grew at its fastest pace in nine months, according to S&P Global. Its index of services activity rose to 54.6 from 51.2 in June. Any reading above 50 signals growth.
The figure came in stronger than the preliminary estimate S&P Global published two weeks ago, which had put the reading at 53.6. Companies surveyed later in the month, in other words, reported better conditions than those surveyed early.
The survey points to “an encouraging acceleration in economic growth” at the start of the quarter, said Chris Williamson, chief business economist at S&P Global Market Intelligence. He estimated the results are consistent with the economy growing at a 2.3 percent annual rate this quarter, up from 1.5 percent in the spring.
New orders climbed at the fastest rate since November, and across the private economy—services plus manufacturing—new business grew the most in 19 months. Because orders come in before the work gets done, that points to activity holding up into August and September. Firms also reported the biggest buildup of unfinished work since February.
Companies hired to keep up. Service firms added workers at the fastest rate in eight months, and private employers as a group added staff for the first time since April.
A different survey, from the Institute for Supply Management, found the same surge in activity. Its overall services index barely moved, ticking up to 54.1 percent from 54 percent. But the measure of actual business activity leapt 3.7 points to 59.1 percent, the second-highest reading in more than two years, and new orders rose to 57.2 percent. Thirteen of 18 industries reported growth, led by retailers, truckers and wholesalers.
The two surveys clashed on jobs. ISM’s employment gauge fell to 47.4 percent, the lowest since March and back below the 50 percent line separating growth from contraction. It has been below that line in 12 of the past 18 months.
They disagreed on exports, too. ISM found foreign orders rising for a sixth straight month, while S&P Global’s companies reported one of the steepest drops in overseas business since late 2022, blaming tariffs and the war in the Middle East.
Costs kept climbing in both surveys. Service firms told S&P Global their expenses rose at the fastest pace since May 2025, citing tariffs, raw materials and fuel. ISM’s price gauge rose to 70.3 percent, topping 70 percent for the fourth time in five months.
But companies are having a hard time making customers pay for it. S&P Global said firms raised their own prices where they could—and the increases they managed were far smaller, by the survey’s measures, than the increases they absorbed. What isn’t passed along comes out of profits.
Executives described the squeeze in their own words. A construction firm said sales kept sliding even after it cut prices, while costs mounted from every direction. A wholesaler said homebuilders were pushing back hard against price increases. A trucking executive said fuel and labor were driving prices up while demand held flat.
The cost pressure was also narrower than the headline suggests. ISM said six commodities got cheaper in July, double the number in June, with copper and aluminum flipping from the list of goods rising in price to the list of those falling. Oil-related products and plastics kept climbing.
Steve Miller, who runs ISM’s services survey, said the sector remains “resilient” and pointed to the recent run-up in oil prices as the source of the pricing pressure still working its way through. Companies mentioned tariffs and the Middle East conflict far less often than in past months, he said.
Some of July’s strength won’t repeat. Both surveys found companies crediting the World Cup and expanded Fourth of July events for a burst of consumer spending. And S&P Global gathered its responses between July 9 and July 29; Williamson warned that the calm in the Gulf and the lower oil prices that helped businesses early in the month had reversed by the end of it.
Still, the surveys describe a service economy moving faster than it was in the spring, with orders piling up and companies adding workers rather than cutting them.
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