U.S. business activity expanded at a faster pace in July as services-sector firms shrugged off concerns over government policies, though manufacturing activity contracted for the first time this year.

The S&P Global Flash U.S. Composite PMI--a monthly gauge of activity in both the manufacturing and services sectors--rose to 54.6 in July from 52.9 in June, a survey showed Thursday. The reading above 50 suggests overall activity continued to expand, this time at a faster pace.

However, business growth became increasingly unbalanced, as manufacturing weakened in contrast to a strengthening services-sector economy, the latter fueled by rising domestic demand, S&P said. Services activity was the strongest since December, the survey said.

But the fading boost from tariff front-running in the early part of the year dragged manufacturing activity this month, said Chris Williamson, chief business economist at S&P Global Market Intelligence.

Confidence about the year ahead also deteriorated as companies cited concerns over the impact of both tariffs and cuts to federal spending, he added.

"Inflation pressures have meanwhile intensified," Williamson added, noting that firms most commonly attributed the higher prices to tariffs as well as increased labor costs.

The resulting rate of inflation for prices charged for goods and services was among the largest seen over the past three years, S&P said.

Source : Dow Jones Newswires