US S&P Global September flash services PMI 46.6 vs 49.2 expected

• Second-fastest fall in almost two-and-a-half years
• Firms linked the decrease to weak client demand and the impact of inflation and higher interest rates
• Services input price inflation rose
• Prior was 49.3
• Manufacturing 49.9 vs 51.0 expected
• Prior manufacturing 52.0
• Manufacturing new orders fell back into contraction
• Decrease in client demand was sharpest since May 2020
• "Alongside domestic inflationary pressures, total new orders were dampened by challenging economic conditions in key export destinations and dollar strength, as new export orders fell steeply."
• Composite 47.3 vs 49.3 expected
• Prior composite 49.5
• Firms’ optimism about the outlook meanwhile deteriorated markedly in October. The resulting degree of confidence was among the lowest in the survey history and the weakest for just over two years.

This is a poor reading and will be a test on whether bad news is good news.

Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said:

“The US economic downturn gathered significant momentum in October, while confidence in the outlook also deteriorated sharply. The decline was led by a downward lurch in services activity, fuelled by the rising cost of living and tightening financial conditions. While output in manufacturing remains more resilient for now, October saw a steep drop in demand for goods, meaning current output is only being maintained by firms eating into backlogs of previously placed orders. Clearly this is unsustainable absent of a revival in demand, and it’s no surprise to see firms cutting back sharply on their input buying to prepare for lower output in coming months.

“One upside of this drop in input buying has been a further alleviation of supply constraints, which alongside the stronger dollar have helped cool price pressures in the manufacturing sector.

“Although price pressures picked up slightly in the service sector due to high food, energy and staff costs, as well as rising borrowing costs, increased competitive forces meant average prices charged for services grew at only a fractionally faster rate. Combined with the easing of price pressures in the goods-producing sector, this adds to evidence that consumer price inflation Inflation Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Read this Term should cool in coming months.

“The surveys therefore present a picture of the economy at increased risk of contracting in the fourth quarter at the same time that inflationary pressures remain stubbornly high. However, there are clearly signs that weakening demand is helping to moderate the overall rate of inflation, which should continue to fall in the coming months, especially if interest rates continue to rise.”