Flash August PMI Data Contained Some Nice Surprises
Price pressures moderated, while employment rose sharply and order books increased.
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The Flash August PMI from S&P Global is out and those preliminary finds point to a pick up in the economy with job growth accelerating to levels not seen since the start of last year.
On the inflation front, price pressure moderated, especially in selling price inflation. Input costs remained elevated during to higher energy cost, but the Flash August findings point to fewer incidents of having to pass through higher fuel and energy prices. That appears to be a key factor in the moderated price pressure. We’ll take it but remain mindful that the higher we see oil, gas and diesel prices, the greater the risk companies will look to pass through some of that cost burden.
The bottom line is that this report is a positive one for the economy and it should, at least for now, temper concerns over higher oil prices. Before one breaks out the bubbly, let’s remember we will get several more pieces of August economic data before the Fed concludes its September policy meeting on September 16. As of now, the odds of the Fed standing pat with federal funds rate is around 64%. To the extent the oncoming data reaffirms today’s Flash August PMI findings, we should see that probability move higher.
The one caveat we’ll share is one we touched on in Friday morning’s opening comments. We’re referring to U.S Treasury Secretary Scott Bessent’s detailed plans that he’s expected to share on Monday, and the response from Iran. Let’s see what Bessent says on Monday, gauge Iran’s response over the ensuing days, and fine tune our thinking as needed.
Now let’s get into the weeds with today’s Flash August PMI report:
Manufacturing and Services
The survey data signal a marked acceleration of business growth so far in the third quarter, though the drivers of growth have diverged. While strong manufacturing growth throughout the second quarter has faded over the summer, such that goods production showed the smallest monthly rise for 13 months in August, service sector activity has revived from the sluggish pace reported in the second quarter to reach the fastest since December 2024.
This changing sector pattern of growth is less evident for order books, with both manufacturing and services again registering robust increases in demand in August. Nonetheless, while the growth trend for orders has slowed…
…supply chain delays remain widespread, with supplier delivery times lengthening in August to one of the greatest extents seen over the past four years, blamed on shipping delays, tariffs and diminished stock availability at suppliers.
Employment
The increase in payrolls signalled was the largest since January 2025 and second largest recorded over the past four years. An especially marked rise in staffing was reported in the service sector, the largest rise since the start of last year, but factory jobs growth also picked up to the highest since May.
Prices
Price pressures moderated in August. Average input costs measured across both goods and services rose at the slowest pace since February. The cooling of services cost inflation from July’s 14-month high was especially marked, while factory input cost inflation moderated for a third month.
As input cost inflation dropped to the lowest since the start of the war in the Middle East, selling price inflation also moderated. Average prices charged for goods and services rose in August at the slowest rate since last November, softening to a ten-month low in services and a six-month low in manufacturing.
