Growth slowed in the services PMI sample during August, to a still solid
54.8 which compares with 55.2 for the mid-August flash and 56.0 for
July.
But the details of August do in fact point to a noticeable
fall-off in activity. New orders slowed to an 8-month low with backlogs
falling for a second straight month and showing what the report
describes as evidence of spare capacity. Hiring in the sample slowed to a
7-month low while output came in at a 4-month low and is now under the
long-term trend. One plus from slowing growth is easing in inflation
pressures with both input costs and selling prices moderating.
These
results together with Tuesday's manufacturing PMI, which came in at
54.7, make for a 1 point dip in the PMI composite for August to 54.7 vs
55.7 in July.
...meanwhile...
ISM's non-manufacturing sample reports sharp acceleration in overall
growth during August, at an index of 58.5 vs July's 55.7 which easily
tops Econoday's consensus range.
Strength is centered in orders
with both new orders, at 60.4, and backlog orders, at 56.5, posting
strong monthly gains. And a strong gain for new export orders, up 2.5
points to 60.5, is a special plus and one that underscores the
importance of service exports for the U.S. economy.
Output for
the sample also rose as did employment which came in at 56.7 for a 6
tenths increase from July and which offers a hint of accelerating
strength for tomorrow's employment report. But there are signs of
capacity stress in the report with input costs remaining elevated and
supplier deliveries continuing to lengthen.
Comments from the
sample's respondents continue to stress the negatives of tariffs on
costs and production though the final effects are hard to see in the
data. Sixteen of 17 industries tracked in this sample posted composite
growth in August led by construction and then by transportation &
warehousing with agriculture the only negative.
ISM's report
includes both construction and mining and may explain its better
performance than this morning's PMI from Markit Economics which tracks
only services. But the bottom line for August is very solid economic
strength for the bulk of the nation's economy.
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