U.S. services activity grows at rapid pace in August

The seasonally adjusted IHS Markit Flash U.S. Services PMI Business Activity Index rose in August from July’s print. The index rose from 54.7 in July to 56.9 in August. This signals the most rapid growth of services activity for 28 months.

Anecdotal evidence shows that solid economic conditions and a rebound in client demand had mainly led to the latest upturn in activity. The latter was underlined by a sharp and accelerated increase in new business received by services firms, with the pace of new order growth reaching a 25-month high in August.

Greater intakes of new work and rising activity levels led companies to hire additional staff in August. Moreover, the pace of payroll growth was just marginally below July’s seven-month record. Average input costs faced by services firms rose further in August. The pace of inflation accelerated a bit from the earlier month and continued to be strong overall. Reports from panellists indicated that greater costs for raw materials was the main driver of inflation in the latest survey period.

Prices charged for services also rose at a much rapid rate in August. Markedly, the pace of inflation was the fastest seen since September 2014, with some firms mentioning that stronger client demand had enabled them to raise their prices.

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