The August US services purchasing managers' index (PMI) conducted by S&P Global came in at 50.5, which was just below the 51.0 forecast. The latest reading keeps the index in expansion territory for the seventh straight month, but represents the weakest growth over that time frame.
From the latest press release, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said:
"The survey data send a hint of rising stagflation risks, as stubborn price pressures are accompanied by a near-stalling of business activity.
"The PMI numbers for the third quarter so far point to a faltering of economic growth after a robust second quarter, as a renewed manufacturing downturn is accompanied by a deteriorating picture in the service sector.
"While a post-pandemic revival of travel, recreation and hospitality spend contributed to an improved economic performance in the spring and early summer, this tailwind is losing momentum. Companies increasingly report customers to have become reticent to spend amid gloomier prospects as higher interest rates and the increased cost of living take their toll. However, financial services and business services providers are also increasingly feeling the pinch from= weakening demand.
"Persistent wage growth is meanwhile being accompanied by renewed upward pressure on energy, fuel and transport costs, as well as some broader firming of materials prices, driving cost growth higher. Competitive forces have kept a lid on selling price inflation, but the rate of increase of service sector charges remains elevated to the extent that consumer price inflation is likely to remain stubbornly above the Fed's target in the coming months.
"The key data to watch in the coming months will be the degree to which any further waning of demand for services translates into lower pricing power and reduced inflation."
Here is a snapshot of the series since mid-2012.
