Aug 22 Reuters U.S. business activity fell to a 4month low in August and firms continued to struggle to pass on higher prices to consumers, bolstering the likelihood that inflation will stay on a downward trend over the coming months.

SP Global said on Thursday that its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, edged down to 54.1 this month, a still healthy level among the highest measured over the past two years. That followed a final reading of 54.3 in July.

A reading above 50 indicates expansion in the private sector. A slight pickup in the services sector was outpaced by an easing in the manufacturing industry.

Average prices charged for goods and services rose at the slowest rate since January and are now at levels that SP Global viewed as consistent with the Federal Reserve39;s 2 inflation target. This echoed reports from businesses that customers are pushing back against high prices, through bargain hunting, scaling back on purchases and trading down to lowerpriced substitutes.

Inflation in July on an annual basis slowed to below 3 for the first time in nearly 312 years, the Labor Department reported last week.

The nearly unchanged composite PMI implied that economic activity remained on a solid footing as the third quarter progressed. Gross domestic product increased at a 2.8 annualized rate in the second quarter, picking up from the JanuaryMarch quarter39;s 1.4 pace.

The solid growth picture in August…