U.S. services sector activity rebounded in July 2024, with the ISM Services PMI rising to 51.4, surpassing the consensus estimate of 51.0 and significantly up from 48.8 in June.

A PMI reading above 50 indicates growth in the services sector, which is crucial as it represents over two-thirds of the U.S. economy.

This marks the fifth month of expansion for the composite index in 2024, according to the Institute for Supply Management.

Despite the overall growth, the Employment index saw a significant decrease, dropping to 46.1 from the prior figure.

However, the services employment measure increased to 51.1 from 46.1, suggesting that the slowdown in nonfarm payrolls did not indicate a decline in the labor market.

Nonfarm payrolls grew by 114,000 in July, marking the second smallest gain this year.

The unemployment rate increased to 4.3% in July, the highest level in nearly three years, up from 4.1% in June.

The ISM's measure of new orders rose to 52.4 in July, up from a low of 47.3 in June, signaling renewed demand.

Business Activity/Production improved to 54.5, rising from 49.6 in June, indicating a positive shift in service sector dynamics.

Services inflation saw a slight increase, with the ISM's prices paid measure for services rising to 57.0 from 56.3 in June.

Financial markets are also anticipating rate cuts in November and December, following the Federal Reserve's decision to maintain its benchmark interest rate at 5.25%-5.50%.