The US services sector showed solid expansion in August, with the Purchasing Managers' Index (PMI) climbing to 55.4, the highest reading since February 2023, indicating robust growth in the service economy [1, 2]. The new orders index surged to 60.9, also the highest since early 2023, reflecting increased demand across the sector [1, 2]. However, input prices paid by US service businesses rose to 72.6, the highest level since mid-2022, highlighting continued cost pressures [1, 2]. Supplier delivery times for services remained slow but improved slightly to a reading of 51.3 [1, 2]. Despite the growth in activity, the US services employment index showed contraction in five of the last six months, pointing to subdued hiring in the sector [2].

Federal Reserve chairman Kevin Warsh commented, saying the central bank will "have work to do" if policymakers don't gain confidence that inflation is moving toward the 2% target, underscoring concerns around persistent input cost increases [1].

In China, the services sector data showed divergent signals. Unofficial survey results from RatingDog indicated expansion, with the services PMI rising from 50.4 in July to 51.4 in August, beating economists' expectations and signaling growth in the sector [3]. The same survey showed services employment increasing for a fourth consecutive month, suggesting improving labor market conditions in services [3]. China's overall private sector PMI, which includes manufacturing and services, rose from 50.8 to 52.1 in August, further pointing to broad-based expansion [3].

However, official Chinese government data painted a contrasting picture, showing the services sector contracted for the second consecutive month in August [3]. This discrepancy between unofficial and official data highlights ongoing uncertainty about the true pace of recovery in China's services industries.

Input costs in China’s services sector increased for the 18th consecutive month, covering labor, raw materials, and energy costs, maintaining inflationary pressures across the sector [3].

The US August PMI readings and cost data underline a continuing recovery in the American services economy despite persistent inflation concerns, while China’s mixed data reveal an uneven recovery.

The next major data update on US services sector performance will come with the September PMI release in early October.