The US Services Purchasing Managers’ Index (PMI) slowed to 50.5 in August from 52.3 in July, the lowest in seven months, S&P Global said.
That number exceeding 50 means that economic activity is increasing. S&P has pointed out that US companies reported an uptick in activity, but this has moderated compared to other months as demand weakened again on the back of “rising interest rates and high inflation”.
New orders fell for the first time in six months, albeit to a ‘minimal’ extent, after being helped by ‘lukewarm’ domestic demand, but export orders picked up. Faced with the slowdown in activity and “growing overcapacity,” companies were hiring at the slowest pace in almost a year.
In terms of prices, the cost of inputs increased, mainly due to higher wage bills. Sales volumes grew more slowly as companies were “reluctant” to pass on the difference in cost to their customers.
“Survey data points to an increased risk of stagflation as continued pressure on the cost side coincides with a near-total shutdown in business,” said Chris Williamson, chief economist at S&P Global Market Intelligence.
