The U.S. non-farm payroll data for August is set to be released on September 6. Ahead of that, the ADP employment report, often referred to as the “mini-NFP,” was published on September 5. The report revealed that private-sector employment in the US rose by 99,000 jobs in August, significantly lower than the market expectation of 145,000, marking the lowest level since 2021 and signaling a further slowdown in the labor market. This has heightened speculations that the Federal Reserve might increase the scale of rate cuts.

The ISM Services PMI, which was released on the same day, presented a more optimistic picture. The August Services PMI came in at 51.5 (previously 51.4), slightly higher than the market expectation of 51.3, remaining in expansion territory for the second consecutive month.

Breaking down the sub-indices, the employment index fell to 50.2 (previously 51.1), in line with the ongoing labor market slowdown but still indicating growth. The new orders index rose to 53.0 (previously 52.4), and the supplier delivery time index increased to 49.6 (previously 47.6), reflecting continued strong demand for services. However, the business activity index dropped to 53.3 (previously 54.5), suggesting that high interest rates and costs are still exerting some negative pressure on business operations. Despite this, all indices remained in expansion, indicating that the overall services sector is still experiencing stable growth.

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In the commentary from managers surveyed, industries with rising demand (such as finance, information, entertainment, and healthcare) reported continued improvement or strength in business activity. Conversely, sectors with declining demand (such as construction, utilities, and wholesale trade) cited high interest rates and cost pressures as factors weakening business activity. Some companies in these sectors are also conducting layoffs or reducing hiring. Overall, while the demand in the services sector is significantly stronger than in manufacturing, there are still signs of uneven recovery across industries.

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Summary: 

• Manufacturing PMI slight uptick
• New orders and production sub-indices continue to decline
• Uneven demand recovery across sectors

 

The U.S. manufacturing PMI showed a slight uptick in August, according to data released by the Institute for Supply Management (ISM) on September 3rd while overall consumer demand continued to weaken. The manufacturing PMI for August registered at 47.2, a modest increase of 0.4 points from July, but it remained in contraction territory for the fifth consecutive month.

 

In terms of the component indices, the new orders and production indices fell to 44.6 (from 47.4) and 44.8 (from 45.9), respectively, while increases in the employment and inventory indices helped lift the overall PMI slightly. This reflects the ongoing restrictive monetary policy and uncertainty surrounding the U.S. presidential election, which have dampened corporate investment sentiment. The persistent weakness in demand has further driven down production, putting additional pressure on corporate profits.

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However, not all industries are facing weak demand prospects. For instance, respondents in the food & tobacco, and computer & electronics industries noted that demand has shifted from the slowdown in the first half of the year to stable growth. Particularly, the computer & electronics sector was the only industry among the 17 covered by the survey that saw increases across new orders, production, backlogs, and inventory indices, indicating a more robust recovery in demand.

On the other hand, industries such as machinery, paper, and chemicals reported that various uncertainties are causing demand to cool, highlighting the uneven nature of demand recovery across sectors.

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