Global benchmark oil prices surged near $100 a barrel from around $70 at the start of July, pushing average U.S. gasoline prices back above $4 a gallon, a direct blow to working-class budgets. This sharp increase follows the recent resumption of air strikes against and by Iran, which shut down traffic in the critical Strait of Hormuz. The U.S.-Israeli-led war with Iran continues to destabilize global supply chains and drive up costs for consumers.
Despite these escalating costs, U.S. services-sector activity accelerated in July. S&P Global's flash services Purchasing Managers' Index rose to 53.6, its highest point since November. The Composite Output Index also climbed to 53.6, marking an eight-month high. This temporary boost in services was, in part, a result of hospitality spending around the FIFA World Cup and USA 250 anniversary activities.
War's Economic Toll
Manufacturing growth, however, eased to its slowest pace since March. The manufacturing PMI slipped to 53.8 from 53.9 in June, as precautionary stock building slowed amid the ongoing conflict. Chris Williamson, chief business economist at S&P Global Market Intelligence, noted that while businesses reported a "good start to the third quarter," this improvement may prove "short-lived." He highlighted the "worrying – though not unexpected – to see manufacturing growth weaken as some of the stock building seen in prior months showed signs of fading." Instead, July saw a "concerning intensification of supply chain delays and accompanying renewed upturn in price pressures, constraining growth and subduing demand."
New order growth for factory goods slipped to a four-month low. Employment expanded only modestly in both sectors, offering little relief to workers facing rising prices. The state's projection of military power directly impacts the cost of living for millions.
Capital's Temporary Gains
Economists polled by Reuters had expected a services PMI rise to 51.5, indicating that the reported 53.6 was a significant, if fleeting, acceleration. Williamson's data are consistent with gross domestic product expanding at a 2.0% pace so far in the current quarter, roughly on par with the first-quarter pace of 2.1%. This growth, however, is built on a foundation of precarious global stability and consumer spending on temporary events.
The State's Hand in Instability
Williamson explicitly linked the economic outlook to imperial actions. He stated, "Events over recent days in the Middle East will have only further exacerbated these supply chain and price worries and raise downside risks to the near-term outlook for the economy, hinting that July’s upturn may not be the start of an improving trend." The U.S.-Israeli-led war with Iran, far from a distant concern, directly fuels inflation and economic uncertainty for the working class at home. The state's military interventions abroad continue to serve capital accumulation by securing resources and markets, while the costs are borne by ordinary people through higher prices and unstable employment.