PMI Flash Reports Show Moderation And Slowing

Reflecting moderation in employment and new orders, growth slowed more sharply than expected in the initial PMIs for August especially manufacturing which came in at 54.5 vs Econoday's consensus for 55.1 and vs 55.5 in July's flash. August's reading indicates the slowest rate of growth for this manufacturing sample since November last year.

Services also slowed, to 55.2 vs expectations for 56.0 and July's flash score of 56.2. This is the slowest growth rate since April and partly reflects the slowest rate of hiring in eight months. The composite reading, which combines manufacturing and services, came in at 55.0 which is 6 tenths under the consensus and 9 tenths under the July flash.

Manufacturing details include slowing job creation and slower growth rates for output and new orders. Capacity stress is still a factor with delivery times lengthening with shortages of truck drivers a key issue. New orders in the service side of today's results are the slowest of the year with backlogs contracting at the fastest rate since March last year.

A benefit of the slowing is an easing in cost pressures to the least severe rates so far this year. Despite the easing, the samples continue to report rising prices for steel-related items along with rising wage pressures. And the service sample is reporting the fastest rise in selling prices in four years.

Indications in these reports hit a peak in May and have been slowing since. Yet rates remain constructive for these samples which generally trend below the strength of the rival samples from the ISM.