Resilience in the US economy is seeping away as consumers are sideswiped by spiralling prices and companies see demand evaporate amid a whirlwind of pressures
Changing spending habits with a shift towards paying for experiences rather than buying more stuff, had put the services sector front and centre in terms of growth.
Now this bulwark of the economy is showing signs of crumbling. The dramatic fall in the S&P Global composite PMI in August was largely due to a big drop in the services index, showing demand falling off a cliff.
It’s yet more fresh evidence of a slowing economy, as supply chain snarl ups, painful inflationary pressures and interest rate hikes are taking their toll. The ultimate impact of this drop in demand should be deflationary but it’s not clear how far and how fast these trends will feed through to lower headline prices.
The data sparked another choppy session on Wall Street, as investors assessed the implications for monetary policy. While central bank policymakers will find it hard to ignore the darker clouds gathering over the US economy, for now more rate hikes are likely in a bid to ensure a lid is fixed firmly on inflation
