Best reading since March 2022
Prelim was 55.2
Prior was 54.3
Composite PMI vs 54.1 prelim
Prior composite was 54.3
New orders growth accelerates, supporting overall activity increase
Employment unexpectedly declines after two months of job creation
Input cost inflation remains sharp, but selling price increases slow to 7-month low

The ISM services number is due at the top of the hour. It’s normally tier-1 data but in the post-covid period, it’s been an unreliable indicator.

Chris Williamson, Chief Business Economist at S&P
Global Market Intelligence, said:

“An improvement in the headline services PMI to its
highest for nearly two-and-a-half years provides further
encouraging evidence that the US economy is enjoying
robust economic growth in the third quarter, adding to signs
of a ‘soft landing’.

“The faster service sector expansion means the PMI
surveys are signalling GDP growth of 2-2.5% in the third
quarter. At the same time, the August survey data signaled
a further cooling of selling price inflation, notably in the
service sector, which has now eased close to the average
seen prior to the pandemic and a level consistent with the
Fed’s 2% inflation target.

“Services growth has been buoyed in particular by the
prospect of lower interest rates, but there are several
headwinds which could dampen growth in the months
ahead. Business optimism and investment is being subdued
by uncertainty regarding the outcome of the Presidential
Election. Hiring is meanwhile being constrained by labor
shortages, which also continue to put upward pressure on
wages.

“However, perhaps more worryingly, the recent downturn
in manufacturing activity is showing some signs of spilling
over to the broader economy, notably via stalled orders for
industrial services.

“It will therefore be important to monitor whether the
service sector succumbs to the recent weakening of factory
activity or whether looser monetary policy creates a rising
tide to lift all boats.”

This article was written by Adam Button at www.forexlive.com.