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US PMI Slumps, Led By Services

US DATA
  • The composite PMI slumped from 47.7 to 45.0 in the preliminary August print, the lowest since Feb’21.
  • It masked an even larger decline and a heavy miss for services, falling from 47.3 to 44.1 (cons 49.8) to the lowest since May’20, whilst manufacturing saw a more subdued decline from 52.2 to 51.3 (cons 51.8) although is still the lowest since Jul'20.
  • S&P Global note that “material shortages, delivery delays, hikes in interest rates and strong inflationary pressures all served to dampen [composite] customer demand, according to panellists”.
  • This showed up with the sharpest drop in new orders in over two years, with new sales weighed down by both weak domestic and foreign client demand with new export orders falling further and at a solid pace.
  • Inflationary pressures cooled though, “with input prices rising at the slowest pace for a year-and-a-half. In line with the trend for cost burdens, firms increased their selling prices at the softest pace in 18 months in August”.
  • Treasuries have firmed on the release with 2Y yields touching session lows on the snap reaction and currently -3.3bps on the day at 3.276%, driving a twist steepening with 10YY holding on for +1.9bps in a reversal of the mornings twist flattening.
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