The numbers: The U.S. is on track to show a big increase in growth in the third quarter based on gross domestic product, but other measures suggest the economy has actually slowed toward the end of summer.
The S&P Global flash U.S. services-sector index fell to a six-month low of 51 in August from 52.3 in the prior month. Most Americans are employed on the service side of the economy, in areas such as health care, retail and hospitality.
The S&P U.S. manufacturing-sector index, meanwhile, slipped to 47 from 49 and remained in negative territory.
The S&P Global surveys are among the first indicators each month to provide an assessment of the health of the economy. Any number above 50 signals expansion, while numbers below 50 point to contraction.
One caveat: The S&P surveys have consistently shown the economy to be weaker than other measures of U.S. growth.
Read: This Fed GDP forecast has the U.S. growing 5.8% in the third quarter. No, really.
Key details: New orders, a sign of future demand, fell for the first time in six months in a bad omen.
Hiring barely increased and some companies laid off more workers to offset higher labor costs in the face of slackening demand.
Inflation trends were mixed. Companies felt more pressure from rising labor costs and higher prices for some raw materials such as oil. Yet many firms avoided raising prices for customers to remain competitive.
“Reports of customer requests for discounts and competitive pricing stymied upticks in selling prices,” S&P said.
Big picture: The large service side of the economy has been delivering virtually all of the growth, but the S&P survey suggests momentum has faltered.
Most manufacturers aside from carmakers, for their part, have fared poorly, hurt in part by a shift in consumer demand to services from goods.
So far the economy has managed to skirt a recession, however.
Looking ahead: “A near-stalling of business activity in August raises doubts over the strength of U.S. economic growth in the third quarter,” said Chris Williamson, chief business economist at S&P Global. “Companies report that demand is looking increasingly lethargic in the face of high prices and rising interest rates.”
“One upside is that weak demand is starting to limit pricing power, which
should help keep a lid on inflation around the 3% mark,” he added.
Market reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
rose in Wednesday trades.
Read the full article here