U.S. Economy Weakens in August as Stagnation Rears Head, PMIs Suggest

By Ed Frankl

Business activity in the U.S. rose at a weaker pace in August, as activity teetered near stagnation across the private sector, according to a purchasing managers' survey published Wednesday.

The S&P Global Flash Composite Output Index--which gauges activity in the manufacturing and services sectors--fell to 50.4 in August from 52.0 in July, the lowest rate in six months.

The reading suggests that U.S. economic output is expanding, albeit only marginally, coming in just above the 50 no-change mark.

"A near-stalling of business activity in August raises doubts over the strength of U.S. economic growth in the third quarter," Chris Williamson, chief business economist at S&P Global Market Intelligence said.

In addition, demand is looking increasingly lethargic in the face of high prices and rising interest rates, he said.

While services had led acceleration of growth in the second quarter of the year, that effect has now faded, together with a further drop in factory output, Williamson added.

Manufacturing slipped further into contraction territory, according to the PMI, coming in at 47.0, compared with 49.0 in July. It also missed expectations of 49.0 in a consensus forecast from economists polled by The Wall Street Journal.

Meanwhile, the flash services PMI slowed further to 51.0 in August from 52.3 last month, its lowest level since February and missing expectations that it would rise slightly to 52.5.

Rising wages, alongside increased energy prices, also are pushing input-cost inflation up, which will raise concerns prices will stay higher for longer, Williamson said.

Write to Ed Frankl at edward.frankl@wsj.com

(END) Dow Jones Newswires

August 23, 2023 10:21 ET (14:21 GMT)

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