EU production index registers 54.1 points in August

U.S. business activity fell to a four-month low in August as firms continued to struggle to pass on higher prices to consumers, increasing the likelihood that inflation will remain on a downward trend in coming months.

S&P Global reported Thursday that its U.S. composite manufacturing PMI index, which includes the manufacturing and services sectors, fell to 54.1 this month, a still-healthy level that is among the highest measured in the past two years.

The index stood at 54.3 in July. A reading above 50 indicates private sector expansion.

The largely unchanged composite PMI suggested that economic activity remained on solid footing as the third quarter progressed. Gross domestic product (GDP) grew at an annualized pace of 2.8 percent in the second quarter, up from 1.4 percent in the January-March quarter.

“August’s solid growth outlook points to robust GDP expansion of more than 2 percent annualized in the third quarter, which should help allay fears of a near-term recession,” said Chris Williamson, chief economist at S&P Global Market Intelligence. Likewise, the decline in sales price inflation to a level close to the pre-pandemic average indicates a “normalization of inflation and strengthens the case for lower interest rates.”

The S&P Global index of new orders received by private companies rose to 52.3 from 52.2 in July. The measure of prices paid by companies for inputs was unchanged at 58, but the gauge of prices charged fell to 52.8 from 53.1 in July.

The manufacturing PMI index fell to an eight-month low, falling to 48 this month from 49.6 in July. Economists polled by Reuters had expected the index for the sector, which accounts for 10.3 percent of the economy, to remain unchanged.

The services PMI index rose to 55.2 points from 55 in July, beating economists’ expectations for a drop to 54 points.

Jobless claims and home sales rise

While the number of Americans filing new claims for unemployment benefits rose in the past week, the level still suggests a gradual cooling of the labor market remains intact.

Initial applications for state unemployment benefits rose 4,000 to 232,000 in the week ended Aug. 17, the Labor Department said.

Meanwhile, sales of previously occupied homes ended a four-month decline in July as easing mortgage rates and a rebound in properties on the market encouraged home buyers.

Latest home sales were slightly higher than the 3.92 million economists had expected, according to FactSet.

The average interest rate on a 30-year mortgage fell this week to its lowest level in 15 months, providing relief to home buyers in a housing market that remains out of reach for many.

The interest rate was cut to 6.46 percent from 6.49 percent last week, mortgage lender Freddie Mac said. A year ago, the average rate was 7.23 percent.