US business activity edges lower; pricing power ebbs further

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Manufacturing Sector News

S&P Global,Price Inflation

S&P Global said on Thursday that its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, edged down to 54.1 this...

- U.S. business activity fell to a 4-month low in August and firms continued to struggle to pass on higher prices to consumers, bolstering the likelihood that inflation will stay on a downward trend over the coming months.

Average prices charged for goods and services rose at the slowest rate since January and are now at levels that S&P Global viewed as consistent with the Federal Reserve's 2% inflation target. This echoed reports from businesses that customers are pushing back against high prices, through bargain hunting, scaling back on purchases and trading down to lower-priced substitutes.

"The solid growth picture in August points to robust GDP growth in excess of 2% annualized in the third quarter, which should help allay near-term recession fears," said Chris Williamson, chief business economist at S&P Global Market Intelligence. "Similarly, the fall in selling price inflation to a level close to the pre-pandemic average signals a 'normalization' of inflation and adds to the case for lower interest rates.

Its flash services PMI rose to 55.2, from 55.0 in July, confounding economists' expectations for a drop to a reading of 54.0. S&P Global said sentiment about the future continued to be adversely impacted by uncertainty regarding the November presidential election and concerns about future demand, particularly in the manufacturing sector.

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