August PMIs Fall More Than Expected: Manufacturing Contracts, Services Ebb, Raising Economic Concerns

The American economy has been able to stand firm against recessionary fears, displaying remarkable resilience this year, but the latest industry trends reveal some clouds in the sky.

The preliminary August Purchasing Managers’ Index (PMI) estimates, a crucial barometer of economic vitality, have revealed figures below expectations for both the manufacturing and services sectors.

“A near-stalling of business activity in August raises doubts over the strength of US economic growth in the
third quarter. The survey shows that the service sector led acceleration of growth in the second quarter has
faded, accompanied by a further fall in factory output,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

Manufacturing Contraction Worsens

The S&P Global US Manufacturing PMI fell from 49 in July to 47 in August, well below market expectations of 49.3. This marks the second-largest monthly decline in 2023. Reduced new sales prompted manufacturers to scale back operations, causing a more rapid decline in input purchases.

Services Sector Takes A Breather

The services sector’s expansion further narrowed, as elevated interest rates and inflationary pressures were observed to exert downward pressure on consumer spending.

The Services PMI dropped from 52.3 to 51 in August, revealing the sector’s slowest growth since February, as demand conditions further cool. The outcome was lower than the expected 52.2. Service firms saw the largest drop in new business since the start of the year

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