U.S. business activity edged lower in August, hitting a four-month low, as firms continued to grapple with the challenges of passing on higher costs to consumers. S&P Global’s flash U.S. Composite PMI Output Index, which monitors both manufacturing and services sectors, dipped slightly to 54.1 from 54.3 in July, signaling ongoing expansion but at a slower pace. The slight decline in the index reflects the contrasting performances within the economy, where a modest increase in the services sector was overshadowed by a more significant slowdown in manufacturing.
The report highlighted that the average prices charged for goods and services rose at their slowest pace since January, as businesses faced increasing resistance from consumers who are now more price-sensitive. This resistance is manifesting in bargain hunting, reduced purchasing, and a shift towards lower-cost alternatives. The easing of price pressures, coupled with the continued slowdown in inflation, strengthens the case for a potential lowering of interest rates by the Federal Reserve. Despite the slowdown in manufacturing, the overall economic activity remains robust, with gross domestic product (GDP) growth expected to exceed 2% in the third quarter, helping to alleviate concerns about an imminent recession.
Market Overview:- U.S. business activity falls to a four-month low in August.
- Inflation continues to moderate as pricing power weakens.
- S&P Global Composite PMI indicates slowing economic expansion.
- Average prices rose at the slowest rate since January due to consumer pushback.
- Private sector employment declined, with manufacturing adding the fewest jobs since January.
- Manufacturing PMI fell to an eight-month low, while services PMI unexpectedly rose.
- GDP growth is expected to exceed 2% in the third quarter, easing recession fears.
- Inflation trends towards normalization, increasing the likelihood of Fed rate cuts.
- Uncertainty around the November presidential election continues to impact business sentiment.
However, the survey also pointed to challenges ahead, particularly in employment. Private sector employment saw a decline in August, with the service sector cutting jobs and the manufacturing sector adding the fewest jobs since January.
Looking forward, the outlook for the U.S. economy remains cautiously optimistic, with solid GDP growth expected to persist into the third quarter.
