the us services sector rebound from the covid19 pandemic fell into reverse in july as activity weakened on high inflation and an uncertain economic outlook data from a purchasing managers survey showed wednesday the sp global us services pmi fell to 473 in july from 527 in june the first reading coming in under the 50point threshold which suggests contraction since june 2020 economists polled by the wall street journal expected the index to be unchanged from its preliminary midmonth level of 470 the drop in activity was solid with output decreasing due to relatively subdued demand worsening financial conditions and higher prices sp global said higher interest rates alongside the ongoing surge in inflation have spilled over to the consumer sector meaning the surge in household spending on goods and activities such as travel tourism hospitality and recreation seen in the spring has now moved into reverse as household spending is diverted to essentials said chris williamson chief business economist at sp global despite the decline in overall activity services providers continued to expand their workforce at a solid pace however employment is likely to weaken in the coming months as firms cut operating capacity in line with subdued demand mr williamson said inflation pressures eased in july according to the survey the rate of selling price inflation eased to the slowest since march 2021 signaling that inflation could have already peaked the sp global us composite pmi fell to 477 in july down from 523 in june signaling the first contraction in overall privatesector activity since june 2020 excluding pandemic lockdown months the overall fall in output was the largest recorded since the global financial crisis and signals a strong likelihood that the economy will contract for a third consecutive quarter mr williamson said