PMI Services Composite Report Flat

Just about flat and no better than flat are the conditions being reported by Markit Economics' US business samples where the headline composite, nearer breakeven 50 at 50.9 for the August flash, came in below Econoday's consensus range. Manufacturing is fractionally below 50 at 49.9 and a 10-year low in a result that will take the notice of Federal Reserve policy makers who are specifically focused on weakness in this sector. Services, however, may soon be another concern at least based on Markit's sample where the score is down sharply this month to an unexpected 50.9.

The text of the report underscores that respondents are often citing subdued levels of corporate spending in what directly confirms Fed worries over business investment, that investment here is slowing as businesses lower their outlooks. Total job creation in the samples is not surprisingly at a nine-year low with the general year-ahead outlook falling for a seventh straight month and at a record low. Further confirming weakness is the first contraction in input costs since the recession 10 years ago and the first contraction in selling prices in 3-1/2 years.

Service respondents are reporting the weakest rate of new orders growth in another 3-1/2 year low. Backlogs for this sample are down for the first time this year. Business expectations are at a 10-year low. For manufacturing, a diminishing contribution from new orders is August's major weakness with export sales falling at the fastest rate in exactly 10 years. This sample is actively trimming inventories.

Weakness for the manufacturing sample is no surprise, unlike services where spillover from manufacturing is the possible indication in what would confirm the Fed's structural assessment that changes in manufacturing precede changes in services.