After the mixed/weak Manufacturing PMI survey data earlier this week, today’s Services PMIs were anticipated to follow suit, with S&P Global showing improvement and ISM remaining steady.
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S&P Global Services PMI for August increased from 54.6 to 56.5 (slightly below the initial 56.8 but still a significant rise) – reaching its highest level since Dec 2024
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ISM Services PMI for August rose from 54.1 to 55.4 (exceeding the expected 54.1) – reaching its highest level since Feb 2026
These positive changes come at a time when actual data is not performing as well…
The S&P Global US Composite PMI for August stood at 56.0, up from 54.5 in July, pushing the index to a 52-month high. The increase in services activity coincided with continued, though slower, growth in manufacturing. This places the US economy ahead of other nations based on survey data…
“Business activity growth across the private sector accelerated in August, indicating a clear positive shift for the US economy,” stated Usamah Bhatti, Economist at S&P Global Market Intelligence.
Survey data now suggests GDP will grow at an annualized rate of 3.0% in the third quarter, a significant improvement from the modest 1.5% recorded in the previous quarter…
With a renewed growth in new business intakes, it appears that growth will continue in the near future.
“There was also a welcomed increase in job growth during August, with employers showing more confidence in both the manufacturing and service sectors.
Job creation was attributed to meeting demand requirements and preparing for future growth as concerns regarding the conflict in the Middle East subsided.”
However, Bhatti noted that “supply delays remained high, particularly for manufacturers, and price pressures continued to exceed historical averages.“
High prices are an issue – reaching levels not seen since July 2022…
Most commodity prices were up (and fuel prices were both up and down?)…
While headline survey index levels may indicate positive growth, comments from respondents reveal that challenges persist:
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“The memory shortage is worsening. For devices requiring (memory) cards, inventory is low and prices are high.” [Retail Trade]
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“General business conditions are favorable. The challenges lie in navigating the dynamic nature of the administration’s policies — tariffs and Middle East conflict — which have created numerous input cost challenges for suppliers and us.” [Accommodation & Food Services]
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“The bond market pushed 30-year mortgage rates up to 6.67 percent, reducing affordability and causing prospective buyers to step back. The new-build housing market continues to slow as the selling season ends and the new school year begins. Rate buydowns and discounts have become standard instead of tools to drive traffic.” [Construction]
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“The conflict in Iran and strain on oil supplies have resulted in higher fuel costs for us. Locally, our economy remains strong, and our housing market is stable. We anticipate steady enrollment as long as the local economy remains robust.” [Educational Services]
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“Rising health-care costs, regulatory complexity, and reimbursement pressure continue to create a cautious purchasing environment among health insurers. Focus remains on cost management, supplier performance, operational efficiency, and risk mitigation, leading to increased scrutiny of supplier value, contract commitments, and strategic investments.” [Finance & Insurance]
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“The stacked Section 301 duties and newer forced-labor related tariffs are keeping landed costs high and necessitating constant TCO recalculations. We are actively considering dual-sourcing and nearshoring options, but limited capacity, lead times, and quality consistency for certain specialty materials and components pose challenges. This has led to higher inventory levels, longer planning cycles, and margin pressure that we can only partially pass on. On a positive note, Florida ports (especially Port Everglades and the broader South Florida gateway) remain relatively smooth compared to congestion spikes earlier in the year on the West Coast and in Europe.” [Professional, Scientific & Technical Services]
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“We have received communications regarding tariffs that are being refunded. Fewer materials are on back-order at this time.” [Health Care & Social Assistance]
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“Concerns about market trends, declining hospital revenue sources, and increasing debt management are causing our customers to hesitate to expand.” [Management of Companies & Support Services]
There are some positive remarks as well:
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“Business is picking up and projected to increase over the next six months.” [Other Services]
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“The electrical distribution industry is experiencing strong volume demand and opportunities. Commodities-based materials like copper, aluminum, and polyvinyl chloride continue to see price fluctuations on a weekly basis. Geopolitical issues such as tariffs continue to impact pricing. Supplier capacities remain strained due to high market demands.” [Wholesale Trade]
Lastly, Bhatti suggests that growth momentum has shifted from manufacturing to services, with services experiencing the most significant expansion since the end of 2024.
“Manufacturing growth, on the other hand, remained stable as both output and new orders increased at slower rates.”
Will strong growth and high prices be enough to prompt Warsh to act in two weeks? Waller’s recent statements have tempered the market’s enthusiasm for a rate hike.
instructions in a more concise manner.