U.S. private sector business activity growth slows in August

Preliminary data released by IHS Markit on Thursday indicated that the U.S. private sector growth hit a three-month low in August, as new orders posted the slowest rise for a decade.

According to the report, the Markit flash manufacturing purchasing manager's index (PMI) stood at 49.9 in August, down 50.4 in July. The latest reading pointed to the first contraction in the manufacturing sector since September 2009.

Economists had expected the reading to increase to at 50.5.

A reading above 50 signals an expansion in activity, while a reading below this level signals a contraction.

According to the report, the decline in the headline PMI mainly reflected a much weaker contribution from new orders, which offset a stabilization in employment and fractionally faster output growth.

Meanwhile, the Markit flash services purchasing manager's index (PMI) dropped to 50.9 this month, from 53 in the prior month. The latest reading pointed to only a marginal rate of expansion in the service sector.

Economists had expected the reading to decrease to 52.8.

Overall, IHS Markit Flash U.S. Composite PMI Output Index came in at 50.9 in August, down from 52.6 in the previous month, signaling only a slight increase in business activity and the slowest pace of expansion for three months.

Commenting on the flash PMI data, Tim Moore, Economics Associate Director at IHS Markit noted: “August’s survey data provides a clear signal that economic growth has continued to soften in the third quarter. The PMIs for manufacturing and services remain much weaker than at the beginning of 2019 and collectively point to annualized GDP growth of around 1.5%. The most concerning aspect of the latest data is a slowdown in new business growth to its weakest in a decade, driven by a sharp loss of momentum across the service sector”.