- Prior was 55.7 (best in two years)
- Manufacturing 47.0 vs 48.5 expected
- Prior manufacturing 47.9
- Composite 54.4 vs 54.6 prior
- average prices charged for goods and services rising at the fastest rate since March
- Rates of selling price inflation moved up to six-month highs in both manufacturing and services, in both cases running above pre-pandemic long-run averages to point to elevated rates of increase
- A one- year high rate of cost inflation in the service sector was often linked to the need to raise pay rates for staff
- Manufacturing input cost growth cooled to a six-month low
- Optimism about output in the year ahead deteriorated sharply, the survey’s future output index falling to its lowest since October 2022 and the second lowest seen this side of the pandemic
- Employment fell for a second month running in September and has now fallen in four of the past six months
- Full report
The manufacturing and services sides of the economy are certainly moving in opposite directions. The falling optimism is possibly related to the election but that's tough to quantify, in particular because manufacturing sentiment held up.
Commenting on the data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said:
“The early survey indicators for September point to an economy that continues to grow at a solid pace, albeit with a weakened manufacturing sector and intensifying political uncertainty acting as substantial headwinds. A reacceleration of inflation is meanwhile also signalled, suggesting the Fed cannot totally shift its focus away from its inflation target as it seeks to sustain the economic upturn.
“The sustained robust expansion of output signaled by the PMI in September is consistent with a healthy annualized rate of GDP growth of 2.2% in the third quarter. But there are some warning lights flashing, notably in terms of the dependence on the service sector for growth, as manufacturing remained in decline, and the worrying drop in business confidence.
“Business sentiment, demand, hiring and investment are being subdued by uncertainty surrounding the Presidential Election, casting a shadow over the outlook for the year ahead at many firms.
“The survey’s price gauges meanwhile serve as a warning that, despite the PMI indicating a further deterioration of the hiring trend in September, the FOMC may need to move cautiously in implementing further rate cuts. Prices charged for goods and services are both rising at the fastest rates for six months, with input costs in the services sector – a major component of which is wages and salaries – rising at the fastest rate for a year.”
The Fed and the bond market have moved beyond inflation. Are they missing something?
