U.S. service sector’s business activity rises weakly in August, PMI index falls to 54.8

U.S. service sector’s business activity saw a weaker rise in August. The seasonally adjusted final IHS Markit U.S. Services Business Activity Index came in at 54.8, a drop from 56 in July. Panelists linked the output growth to greater client demand and the opening of new facilities. Nevertheless, the overall rate of growth slowed to the weakest since April.

New business also rose in the month, but the pace of growth fell to an eight-month low. Anecdotal evidence attributed the rise to the acquisition of new clients and new project launches. In spite of the pace of new business growth outstripping that of output, backlogs contracted for the second month running. The rate of fall was marginal and eased a bit from that seen in the prior month.

Although still strong, the pace of job creation fell to a seven-month low in August. Companies commonly reported difficulties finding suitable candidates, while greater business requirements and a sustained rise in new orders led many to increase employment.

Input prices paid by service sector companies continued to increase at a solid rate in August. However, the rate of inflation weakened to a five-month low, the increase was faster than the series trend. Anecdotal evidence implied that higher cost burdens stemmed from greater purchases prices and a rise in fuel costs.

Larger cost burdens were partially passed on to clients through higher output charges. Delays receiving purchases and higher wage costs were commonly mentioned as placing strain on profit margins. The pace of inflation continued to be solid and close to July’s recent peak.

Business sentiment was strongly positive and optimism rebounded from July’s recent low in August. Panelists stated that output expectations were due to planned investment, greater marketing activity and a sustained rise in new business.

At 16:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was neutral at -49.7023. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex