Ism Services Pmi Jumped In August

 Ism Services Pmi Jumped In August

ISM Services PMI Jumped From 52.7 To 54.5 In August

It appears that the services sector of the USA is gaining steam as the new orders and the input prices have jumped higher. However, this also points out the fact that the inflationary pressure in the USA is still elevated.

According to the ISM data, the non-manufacturing sector's PMI touched 54.5 during August. If we look back, this is one of the highest readings of the last 6-7 months. Similarly, it is also a step up from July's 52.7 reading, which suggests that we are inching away from the contraction little by little.

As of now, the services industry of the USA comprises around 75% of the total economy, which further highlights the importance of the recent PMI reading.

The services PMI reading also took most of the economists by surprise as they were forecasting a fall back to the 52.5 level. On the contrary, the actual reading managed to beat the forecast by 0.2.

US Faces Persistent Inflation

However, the one thing that is a little bad for the US economy is the persistence of high inflation. The officials of the Federal Reserve have already raised the interest rate to 5.25% in an attempt to curb it. Although this has cooled down the inflation, it still remains high while the high-interest rates have started to hurt the economic progress.

In addition, the manufacturing PMI continues to contract every month which is a 180-degree turn from the services sector. In fact, the recent PMI for the manufacturing sector has made it 10 consecutive months of contraction.

After considering the PMI of manufacturing and the services sector, there's a good chance that the Fed will not disturb its policy rate at the September meeting. However, what will happen at the last meeting of the 2023 still remains to be seen.

In theory, any further rate hikes will likely hurt the already struggling manufacturing sector. In addition, there's no telling that it might end up hurting the services sector as well.

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