- Prelim was 55.4
- Prior was 55.7
- Composite 54.6 vs 55.1 prior
The absolute number here is a solid one and suggests that the economy is ok at the moment but the declines in business optimism are forward looking and might be problematic. They could also simply reflect the chaotic nature of current US policymaking and never turn into a change in real demand.
The ISM survey is due at the top of the hour.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence
“Although weaker than signaled by the preliminary ‘flash’ PMI reading, and below that seen in July, the expansion of the service sector in August was still the second strongest recorded so far this year. Together with a robust manufacturing PMI reading, the surveys are consistent with the US economy growing at a solid 2.4% annualized rate in the third quarter.
“Fuller order books, reflecting a summer upturn in customer demand, has meanwhile encouraged service providers to take on additional staff in increasing numbers, accompanied by a return to hiring in the manufacturing sector. While low household confidence is reportedly keeping spending on consumer services relatively subdued, demand for financial services is showing especially strong growth amid improving financial market conditions.
“However, the brighter news on current economic growth and hiring is marred by concerns over future growth prospects and inflation. Business optimism regarding the year ahead outlook has dropped to one of the lowest levels seen over the past three years amid escalating worries over the uncertainty and drop in demand caused by federal government policy, most notably tariffs, as well as the associated rise in price pressures. Inflation concerns have been fanned by a further steep rise in input costs which have fed through to another marked increase in average charges for services.
“The survey data therefore point to some downside risks to growth in the coming months while signaling upside risks to inflation, as import tariffs feed through to prices charged for both goods and services.”
