- Best reading since March 2022
- Prelim was 55.2
- Prior was 54.3
- Composite PMI vs 54.1 prelim
- Prior composite was 54.3
- New orders growth accelerates, supporting overall activity increase
- Employment declines after two months of job creation
- Input cost inflation remains sharp, but selling price increases slow to 7-month low
The ISM services number is due at the top of the hour. It's normally tier-1 data but in the post-covid period, it's been an unreliable indicator.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said:
“An improvement in the headline services PMI to its highest for nearly two-and-a-half years provides further encouraging evidence that the US economy is enjoying robust economic growth in the third quarter, adding to signs of a ‘soft landing’.
“The faster service sector expansion means the PMI surveys are signalling GDP growth of 2-2.5% in the third quarter. At the same time, the August survey data signaled a further cooling of selling price inflation, notably in the service sector, which has now eased close to the average seen prior to the pandemic and a level consistent with the Fed’s 2% inflation target.
“Services growth has been buoyed in particular by the prospect of lower interest rates, but there are several headwinds which could dampen growth in the months ahead. Business optimism and investment is being subdued by uncertainty regarding the outcome of the Presidential Election. Hiring is meanwhile being constrained by labor shortages, which also continue to put upward pressure on wages.
“However, perhaps more worryingly, the recent downturn in manufacturing activity is showing some signs of spilling over to the broader economy, notably via stalled orders for industrial services.
“It will therefore be important to monitor whether the service sector succumbs to the recent weakening of factory activity or whether looser monetary policy creates a rising tide to lift all boats.”
