As US economic ‘hard data’ has collapsed in recent months, US manufacturing and services industries PMIs ‘soft data’ have both tumbled, and preliminary August data extended that streak with slower business activity growth reflected the weakest rise in new order volumes since December 2017.

US Manufacturing and Services PMIs miss expectations and drop for the 3rd month in a row…

Staffing levels increased at the softest pace for over one year in August. 

Based on the ‘soft’ survey data that PMIs represent, US remains the ‘best’ among the major economies of the world…

Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

“The US economy lost a little pace in August, according to the flash PMI, but continued to grow at a solid rate. The PMI is indicative of the economy growing at an annualised rate of roughly 2.5%, down from a 3.0% indicated rate in July.

“Output, new orders and employment growth all moderated, adding to signs that the economy has cooled after strong growth in the second quarter.

“Backlogs of uncompleted work, a key indicator of future output and hiring, meanwhile fell for the first time for over a year, suggesting the slowing trend could persist into the fall.

“Manufacturing has led the slowdown, though the service sector has also come off the boil compared to the second quarter highs.

“Some of the slowdown can be attributed to supply shortages: jobs growth in manufacturing and services is being restricted by a lack of available workers, while factories are also constrained by a lack of raw materials, sometimes blamed on ‘panic-buying’ of safety stocks as well as a lack of transportation to ship goods around.

The punchline: companies can no longer pass thru rising costs:

“However, the survey also found increased cases of companies reporting the need to cut costs, in part reflecting the recent steep rise in raw material prices, often linked to tariffs and shortage-related price hikes”.