US Business Activity Steady In September; Price Pressures Pick Up

  • U.S. business activity was steady in September, but average prices charged for goods and services rose at the fastest pace in six months, potentially hinting at a pickup in inflation in the coming months.
  • S&P Global said on Monday that its flash U.S. Composite Purchasing Managers' Index (PMI) Output Index, which tracks the manufacturing and services sectors, was little changed at 54.4 this month compared to a final reading of 54.6 in August. A reading above 50 indicates expansion in the private sector.
  • September's reading aligns with reports this month, including retail sales, that have suggested the economy maintained its solid growth momentum in the third quarter. However, uncertainty about the Nov. 5 presidential election is weighing on business sentiment.
  • The services sector continued to expand at a steady pace, though manufacturing slumped to a 15-month low. Average prices charged for goods and services rose at their quickest pace since March, marking the first acceleration of selling price inflation in four months. The survey's measure of prices paid by businesses for inputs increased to a one-year high of 59.1 from 57.8 last month. Its gauge of prices charged rose to 54.7 from 52.9 in August.
  • Rising costs, mostly in the services sector linked to wage raises, were attributed for the increase. At face value, this would suggest that price pressures were building up again, but there is growing evidence that inflation is cooling. That is, the labour market has slowed considerably this year, with the unemployment rate rising above 4.0% from 3.4% in April 2023 and is likely no longer a threat to inflation.
  • "The early survey indicators for September point to an economy that continues to grow at a solid pace," said Chris Williamson, chief business economist at S&P Global Market Intelligence. "A reacceleration of inflation is meanwhile also signaled, suggesting the Fed cannot totally shift its focus away from its inflation target as it seeks to sustain the economic upturn."

(Source: Reuters)