(Bloomberg) -- US manufacturing activity shrank early this month at the fastest pace this year on further weakness in production, orders and factory employment.
The S&P Global flash August purchasing managers index slid 1.6 points to 48. Readings below 50 indicate contraction, and the figure was weaker than all estimates in a Bloomberg survey of economists.
The group’s report also showed services activity expanded at a solid pace to indicate underlying health in the largest part of the economy. Meanwhile, a measure of prices received by service providers declined to the lowest level since the start of the year.
“On balance the key takeaways from the survey are that inflation is continuing to slowly return to normal levels and that the economy is at risk of slowing amid imbalances,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a statement.
All five components of the manufacturing PMI weakened this month. Output shrank by the most in 14 months, orders contracted for a second month and employment came close to stagnating.
Moreover, inventories of finished goods at manufacturers built up for the third month in the last four, suggesting a greater risk producers will dial back output against a backdrop of retreating bookings.
The story is different for service providers, which experienced slightly faster growth in new business. Those companies were more optimic about output in the coming year on hopes of lower interest rates and inflation.
At the same time, sentiment was restrained by uncertainty surrounding the November presidential election and concerns about demand prospects, particularly in manufacturing.
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