The US ISM Services PMI for July came in at 51.4, exceeding both the forecast of 51 and the previous month's reading of 48.8.
The stronger-than-expected performance signals a potential rebound in the services sector, suggesting some resilience despite the recent broader economic uncertainties as a result of manufacturing and jobs data last week.
The July reading, which is above the neutral level of 50, indicates that the services sector expanded during the month. The index's rise from June reflects improvements in business activity and new orders, suggesting a recovery in service-oriented industries such as finance, healthcare, and professional services.
The data offers a more optimistic view of the economy, countering recent concerns about potential slowdowns. Even so, US indices are still down on Monday.
Analysts had anticipated a modest improvement, but the stronger-than-expected figure has provided some positives amid a negative day for the markets.
Looking slightly deeper into the data shows that business activity rose to 54.5, new orders rose to 52.4, employment increased to 51.1, supplier deliveries fell to 47.6, and inventory change grew to 49.8.