US business activity remains low in September – S&P Global survey

On the window of an IN-N-OUT fast food restaurant in Encinitas, California, USA on May 9, 2022. REUTERS/Mike Blake.

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WASHINGTON, Sep 23 (Reuters) – US business activity declined for the third month in a row in September, although the pace of decline slowed and improvements in global supply chains eased inflationary pressures on companies.

S&P Global said Friday that its composite US PMI, which tracks the manufacturing and services sectors, rose to 49.3 this month from a final reading of 44.6 in August.

A reading below 50 indicates contraction in the private sector. Excluding the downturn during the first wave of the COVID-19 pandemic in the spring of 2020, output in the third quarter was the weakest since the 2007-2009 global financial crisis.

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However, the S&P Global survey likely exaggerates the slowdown in economic activity. Surveys by the Institute of Supply Management showed manufacturing and service industries have grown steadily this year, casting doubt on the notion that the economy is in recession.

Although gross domestic product contracted in the first and second quarters, the income side of the growth book showed that the economy grew at a moderate pace over this period.

The economy is slowing as the Federal Reserve aggressively tightens monetary policy to dampen demand and bring inflation back to the 2% target set by the US central bank.

On Wednesday, the Fed raised rates by 75 basis points, the third consecutive increase of this size. This signaled a larger increase this year.

The overall composite index of new orders rose to 51.2 from a final reading of 47.4 in August.

The index of prices paid by enterprises for inputs fell to 66.8, the lowest level since January 2021, from a final reading of 70.5 in August, reflecting the elimination of supply bottlenecks. Businesses are also not raising their prices as much as they were at the start of the year, in part because demand is slowing.

The flash memory manufacturing PMI rose to 51.8 this month from 51.5 in August. Economists polled by Reuters had expected the index to fall to 51.1. In September, new orders rose for the first time in four months.

As commodity prices slowed, average operating costs for manufacturers rose this month at the slowest pace since November 2020.

Services PMI rose to 49.2 from 43.7 in August. Service businesses also reported lower raw material prices as costs for some materials fell.

Companies passed on savings to their customers where possible. If this trend continues, it could help lower inflation in the coming months. Annual consumer prices rose by 8.3% in August.

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Reporting by Lucia Muticani; Editing by Chizu Nomiyama

Our Standards: Thomson Reuters Trust Principles.

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