Economic data continues to send mixed signals, complicating any assessment of the underlying strength of the economy. While investors have been sorting through uneven economic data releases and heightened uncertainty, business activity surveys suggest the U.S. economy remains on an expansionary path — one of resilience rather than retrenchment.
The latest ISM data offers an encouraging perspective. The ISM services index registered 54.1 in July, extending its expansionary stretch. Business activity and new orders remained healthy, pointing to continued strength in the largest segment of the economy. More notably, the ISM manufacturing index climbed to 55.6, its highest reading in more than four years. After spending much of the past two years in moderately contractionary territory, manufacturing has now remained above the expansion threshold for seven consecutive months. Production, new orders, exports, and employment have all improved, pointing to a manufacturing sector that’s regained some momentum after a prolonged period of weakness.
The accompanying chart illustrates the uneven nature of the current expansion, while also highlighting the importance of the services sector in recent years. Strength therein carried the economy even as manufacturing muddled through a prolonged downturn. More recently, manufacturing has shown renewed momentum, contributing alongside the service sector to a more constructive — and more broadly balanced — economic backdrop.
For investors, the takeaway is that no single data point tells the entire story. Economic growth may be moderating, but activity across key segments of the economy continues to suggest underlying resilience. Maintaining a long-term perspective remains particularly important during periods when headline data and market narratives appear at odds.
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