Investing.com – Activity in the U.S. services sector unexpectedly fell to a six-month low in August, according to preliminary data released on Thursday.
In a report, market research group Markit said that its flash services purchasing managers’ index (PMI) fell to 50.9 in August, from the prior month’s reading of 51.4.
Analysts had expected an increase to 52.0 this month.
On the index, a reading above 50.0 indicates expansion, below indicates contraction.
Services make up approximately 80% of the U.S. economy which makes the data key for interpreting growth.
According to the report, that was the weakest read since last February, when activity in the sector contracted.
Markit further noted that the payroll numbers expanded at the slowest pace in 20 months, although the research group said that business expectations remained stronger than the survey-record low recorded in June.
“The ongoing lacklustre economic growth signaled by the flash PMI suggests GDP growth is failing to accelerate in the third quarter from the weak 1.2% pace seen in the second quarter.” Markit chief economist Chris Williamson warned.
Williamson added that the annualized GDP growth rate would be estimated to be just under 1% for the third quarter based on the data for July and August.
Pointing to the waning job creation and subdued price pressures, he suggested that “the survey data will fuel expectations that the Fed will be in rush to tighten policy again.”
“However, as anecdotal evidence from the survey suggests that business activity is being dampened by uncertainty due to the upcoming presidential election, there’s a good chance that the economy will pick up speed again after the vote, leaving a December rate hike on the table,” Williamson concluded.
In an immediate reaction, EUR/USD was unchanged at 1.1293, GBP/USD was at 1.3196 from 1.3194 earlier, while USD/JPY was at 100.49 compared to 100.48 earlier.
The US dollar index, which tracks the greenback against a basket of six major rivals, was at 94.63, compared to 94.62 ahead of the report.
Meanwhile, U.S. stocks were trading slightly lower after the open. The Dow 30 gave up 21 points or 0.11%, the S&P 500 dropped 3 points or 0.17%, while the tech-heavy Nasdaq Composite slipped 9 points or 0.17%.
Elsewhere, in the commodities market, gold futures traded at $1,324.45 a troy ounce, compared to $1,323.55 ahead of the data, while crude oil traded at $46.94 a barrel from $46.62 earlier.