Household Spending Gathers Pace

• Concerns about the US economy again drove sentiment overnight, with the ISM services report showing weak activity alongside sticky prices, a challenging mix for the Federal Reserve.
• The ISM services index slipped from 50.8 in June to 50.1 in July (consensus: 51.5).
• US government bond yields ended higher after three straight days of declines, though they eased from early-session peaks following the weak services data. The US Treasury’s $58bn 3‑year note auction cleared at 3.669% and met soft demand.
• Domestically, the Monthly Household Spending Indicator rose 0.5% m/m in June versus the 0.8% expected. However, the quarterly volumes measure was strong at 0.7% q/q and 2.4% y/y.
• The data for both June and May point to a lift in consumption momentum heading into Q3.