S&P Global Services PMI drops to 50.5 in August

The seasonally adjusted final S&P Global US Services PMI Business Activity Index posted 50.5 in August, down sharply from 52.3 in July. The number was revised lower from the preliminary 51. The Composite Index was also revised lower from 50.4 to 50.2, the lowest since February. 

“The survey data send a hint of rising stagflation risks, as stubborn price pressures are accompanied by a near-stalling of business activity”, said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence. 

Key takeaways: 

On the inflation front, input prices rose at a steeper pace in August, which was largely driven by higher wage bills. Firms were hesitant to pass through the full extent of increased input prices to their clients, however, as selling prices rose at a softer pace

the fall in new orders was the first in six months and signalled a marked turnaround from the sharp upturn seen in the second quarter of 2023

Firms remained upbeat in their assessment of the outlook for output over the coming year, despite the current muted demand.

The final S&P Global US Composite PMI Output Index* posted 50.2 in August, down from 52.0 in July, to signal only a fractional increase in business activity at US private sector firms. The slowdown in growth stemmed from a weaker service sector expansion and a renewed decrease in manufacturing output.

Market reaction

The US Dollar weakened moderately after the report. Market participants are now eagerly awaiting more data from the sector, with the ISM Services PMI.