US PMI Surveys Signal Growth Rebound In Q3, Strongest Among Global Peers, But...
Following the mixed/weak Manufacturing PMI survey data earlier in the week, today's Services PMIs were expected to be just as mixed with S&P Global higher and ISM flat.
S&P Global Services PMI for August rose from 54.6 to 56.5 (below the preliminary 56.8 but still up bigly) - the highest since Dec 2024
ISM Services PMI for August rose from 54.1 to 55.4 (better than the 54.1 exp) - the highest since Feb 2026
These improvements come as hard data languishes...
The S&P Global US Composite PMI recorded 56.0 in August, up from 54.5 in July and pushed the index to a 52-month high. A stronger rise in services activity coincided with sustained, albeit slower growth in manufacturing. This puts the US economy ahead of the rest of the world based on survey data...
“Business activity growth across the private sector accelerated in August, marking a clear shift in gear for the US economy," said Usamah Bhatti, Economist at S&P Global Market Intelligence.
Survey data now point to GDP growing at an annualized rate of 3.0% in the third quarter, up solidly from the meagre 1.5% recorded in the previous quarter...
Alongside a renewed improvement in new business intakes, growth appears likely to continue at least in the near term.
“There was also a welcome acceleration in jobs growth during August, with employers becoming more confident across both the manufacturing and service sectors.
Job creation was commonly linked to efforts to keep pace with demand requirements, but also to prepare for future growth as concerns regarding the conflict in the Middle East started to fade."
That said, Bhatti points out that "supply delays remained elevated, notably for manufacturers, while aggregate price pressures also stayed above their historical average."
Prices are a problem - the highest since July 2022...
Most commodity prices were higher (and fuel was both higher and lower?)...
Everything may be awesome at the headline survey index levels but reading the respondents comments makes it clear that it's not all rainbows and unicorns:
“The memory shortage is continually getting worse. For devices requiring (memory) cards, inventory is low and prices are high.” [Retail Trade]
“General business conditions are positive. The challenges lie in managing through the dynamic nature of the administration’s policies — tariffs and Middle East conflict — that have caused numerous input cost headwinds for suppliers and us.” [Accommodation & Food Services]
“The bond market pushed 30-year mortgage rates up to 6.67 percent, reducing affordability and moving prospective buyers back to the sidelines. The new-build housing market continues to slow with the selling season coming to a close and the start of the new school year. Rate buydowns and discounts have become the norm instead of the tool to drive traffic.” [Construction]
“The conflict in Iran and strain on the oil supplies has resulted in our paying higher cost for fuel. Locally, our economy continues to perform well, and our housing market is solid. We expect our enrollment to remain steady as long as the local economy stays strong.” [Educational Services]
“Rising health-care costs, regulatory complexity and reimbursement pressure continue to drive a cautious purchasing environment within health insurers. Focus remains on cost management, supplier performance, operational efficiency and risk mitigation, resulting in increased scrutiny of supplier value, contract commitments and strategic investments.” [Finance & Insurance]
“The stacked Section 301 duties plus the newer forced-labor related tariffs are keeping landed costs elevated and forcing constant TCO recalculation. We are actively dual-sourcing and evaluating nearshoring options, but qualified capacity, lead times and quality consistency are limited for certain specialty materials and components. The results are higher inventory buffers, longer planning cycles, and margin pressure that we can only partially pass through. On the positive side, Florida ports (especially Port Everglades and the broader South Florida gateway) remain relatively fluid compared with the congestion spikes earlier in the year on the West Coast and in Europe.” [Professional, Scientific & Technical Services]
“We received a few communications regarding tariffs that are being refunded. Fewer materials being back-ordered at this time.” [Health Care & Social Assistance]
“Concerns about market trends, reduced hospital sources of revenue and increasing debt management creating reluctance of our customers to expand.” [Management of Companies & Support Services]
There are some positive notes:
“Business is picking up and forecast to increase over the next six months.” [Other Services]
"The electrical distribution industry volume demand and opportunities remain very strong. Commodities-based products of materials like copper, aluminum and polyvinyl chloride continue to have price increases and adjustments on a weekly basis. Geopolitical issues like tariffs continue to impact pricing as well. Supplier capacities are still strained due high market demands.” [Wholesale Trade]
Finally, Bhatti notes that growth momentum appears to have shifted from manufacturing to services, with the latter seeing the pace of expansion surge to the highest since the end of 2024.
"Manufacturing growth, meanwhile, was unchanged as both output and new orders rose at weaker rates."
Is strong growth and elevated prices enough to trigger Warsh to pull the trigger in two weeks? Waller's comments this morning dampened the market's enthusiasm for a hike.