The seasonally adjusted Markit Flash U.S. Services PMI™ Business Activity Index signalled a slight loss of momentum across the service economy in September. At 55.6, down from 56.1 in August, the headline index – which is based on approximately 85% of usual monthly replies – remained comfortably above the 50.0 no-change threshold, but pointed to the slowest rate of output expansion since June.
Survey respondents noted that improving domestic economic conditions continued to support business activity growth during September, especially among consumer-focused service providers. However, anecdotal evidence also suggested that some clients had delayed committing to new projects amid heightened uncertainty regarding the business outlook. Reflecting this, latest survey data indicated a slowdown in overall new business growth for the second month running, which brought the pace of expansion down to its weakest since January.
Softer growth of new work contributed to a decline in unfinished business for the third time in the past four months. Although only modest, the latest reduction in backlogs was the fastest since April 2014, suggesting a general lack of pressure on operating capacity. Meanwhile, payroll numbers increased at the slowest pace for three months in September, but the rate of staff hiring was still robust in comparison to the post-crisis average.
Looking ahead, service providers remain optimistic overall about their prospects for business activity during the next 12 months. Anecdotal evidence cited expectations of improving consumer demand and supportive economic conditions. However, the balance of firms expecting a rise in business activity eased further from May’s recent peak and was the second-lowest since June 2012.
Input price inflation dropped to its lowest for seven months in September, which service providers mostly attributed to the influence of decreased fuel costs. Reduced cost pressures, alongside strong competition for new work, contributed to a fall in average tariffs for the second month running (representing the first back-to-back decline since the survey began in late-2009). Although only modest, the latest reduction in service sector charges was the fastest since November 2010.
Markit Flash U.S. Composite PMI™
At 55.3 in September, down from 55.7 in August, the seasonally adjusted Markit Flash U.S. Composite PMI Output Index posted above the neutral 50.0 mark for the twenty-third month running and indicated a robust pace of expansion. The latest reading was nonetheless the lowest since June, as a weaker contribution to growth from services activity offset a stronger expansion of manufacturing production (‘flash’ output at 54.3 in September, up from 53.8 in August).
Looking beyond the headline output index, latest composite data also highlighted a further reduction in average prices charged by U.S. private sector companies. At 48.8 in September, the seasonally adjusted index was down from 49.9 in August and the lowest since this series began in October 2009.
The composite index is based on original survey data from the Markit U.S. Services PMI and the Markit U.S. Manufacturing PMI.