Fresh PMI data released by S&P Global today reveals a significant acceleration in U.S. business activity, led by a striking surge in the technology sector. The July figures not only exceeded expectations across key indicators but also highlighted the strongest tech-driven growth momentum since the post-pandemic rebound of 2021. In a climate of mixed macroeconomic signals, the latest data reinforces investor confidence and may influence near-term monetary policy expectations.

Services and Composite PMIs Beat Forecasts, Signaling Broad-Based Expansion

The S&P Global U.S. Services PMI rose to 55.7 in July 2025, beating analyst estimates of 55.2. This marks another consecutive month of expansion in the service economy, with broad-based growth across transportation, healthcare, business services, leisure, and hospitality. As the services sector comprises more than 70% of U.S. GDP, this reading carries significant macroeconomic weight.

Additionally, the Composite PMI – which aggregates both services and manufacturing – came in at 55.1, outpacing the expected 54.6. This level signals continued economic momentum across diverse industries and suggests that both consumer demand and business spending remain resilient. The fact that the index remains well above the 50-point threshold indicates healthy expansion, even amid high interest rates and persistent geopolitical uncertainty.

Technology Leads the Charge – Sector Growth Hits Four-Year High

The standout performer in this month’s data is clearly the technology sector. According to the S&P Business Activity Index by industry, tech companies posted the sharpest expansion in activity since early 2021. The green line representing technology in the chart shows a pronounced upward spike, with the index pushing well above 60 – a level typically associated with rapid growth.

This surge may reflect a wave of renewed capital investment in AI infrastructure, strong demand for SaaS solutions, and improved sentiment among both enterprises and consumers. Tech firms appear to be benefiting from a shift in corporate strategy toward digital transformation, while consumer-facing platforms are seeing increased engagement amid stable employment trends.

The easing of financial conditions, especially the stabilization of borrowing costs, may have also reignited projects that were previously delayed. The sector’s performance reinforces its position as a structural engine of economic growth, particularly in times of global realignment and technological disruption.

Consumer Services and Basic Materials Lag Behind

In contrast, more traditional sectors such as Consumer Services and Basic Materials continue to tread water. Their respective activity levels hover near the neutral 50 mark, indicating slow or stagnant growth. The subdued trend in Consumer Services likely reflects tightening household budgets, as elevated prices continue to weigh on discretionary spending. Even with inflation moderating compared to 2023, real wage growth remains limited, and households are showing more caution in their consumption choices.

Meanwhile, the Basic Materials sector – encompassing metals, chemicals, and industrial inputs – shows signs of underperformance. This may be due to waning industrial demand, inventory corrections, and weakness in construction and export-related activities. With global manufacturing still uneven, the sector’s sluggishness is consistent with broader cyclical dynamics.

Macroeconomic Implications – Fed Policy, Risk Appetite, and Market Positioning

The strength of today’s PMI data presents a new challenge for the Federal Reserve. While robust business activity could stoke future inflationary pressures, the absence of sharp price increases may allow the Fed to maintain its current policy stance. For now, the data supports a “wait and see” approach rather than an urgent shift in rates.

In equity markets, the report reinforces bullish sentiment, particularly toward growth and tech-related equities. Investors may favor increased exposure to innovative sectors over cyclical or rate-sensitive plays. However, with valuations already elevated in many tech stocks, markets may remain vulnerable to any downside inflation surprises or earnings disappointments.

Sector Divergence May Deepen – A Structural Rotation Underway

The July PMI report highlights a broader structural shift taking place beneath the surface of the U.S. economy. As technology accelerates and traditional sectors struggle to keep pace, investors, policymakers, and corporate leaders may need to reassess their strategic allocations. The divergence in growth trajectories is not just a short-term anomaly – it may reflect a long-term transition toward a more digitized, automated, and innovation-driven economic framework.

For long-term investors, this evolving landscape presents both opportunity and risk. Monitoring sector-specific PMIs and capitalizing on early signs of rotation will be critical for maintaining performance in an increasingly complex and polarized market environment.