US economic growth has downshifted lately, but only moderately so, according to this morning’s flash estimate of the Services PMI data for September. Markit’s sentiment benchmark for the sector, which represents the dominant slice of US economic activity and payrolls, dipped to 55.6 in this month’s initial reading from 56.1 in August. But that’s still a solid pace and is well above the neutral 50.0 mark that separates growth from contraction. In short, the Services PMI suggests that the US macro trend is still positive.

The relatively upbeat report for services follows Wednesday’s news that the US Manufacturing PMI was unchanged in September at a moderately positive 53.0 level. Although there are heightened concerns these days about the near-term outlook for the US, this week’s PMI updates suggest that there’s still a tailwind blowing in the world’s largest economy. It remains to be seen if the full boat of September’s economic indicators that will published in the weeks ahead will confirm the preliminary PMI data. But for the moment, the odds look favorable via this week’s reports from Markit.

“The survey data point to sustained steady expansion of the US economy at the end of the third quarter, but various warning lights are now flashing brighter, meaning growth may continue to weaken in coming months,” said Chris Williamson, Markit’s chief economist. He explained:

Although the surveys suggest the economy expanded at a 2.2% annualised rate in the third quarter, growth slowed in September and could weaken further in coming months. Business optimism slumped to one of the lowest levels seen since the global financial crisis, inflows of new business rose at the weakest rate for eight months and job creation slipped to a six-month low. Growth is also becoming increasingly reliant on the services economy as manufacturers struggle against the strong dollar and weak demand in export markets.

The Atlanta Fed’s GDPNow model aligns with Williamson’s outlook for slower growth. Yesterday’s revised estimate reflected a downtick in the pace of projected third-quarter GDP growth to 1.4%–less than half the rate in today’s upwardly revised estimate of 3.9% growth for Q2 GDP (seasonally adjusted annual rate).


Macro risk may be on the rise going forward, but today’s Services PMI offers some encouragement for thinking that US economic growth will at least endure in September once all the macro numbers are published in the weeks ahead. In other words, the positive trend through August is unlikely to suffer a fatal stumble in the current month. Deciding if forward momentum will persist in some degree for the rest of year and into 2016, however, comes with a bit more baggage at the moment.