U.S. business activity remains weak in September - S&P Global Survey

A “Now Wanted” sign hangs in the window of an In-N-Out fast food restaurant in Encinitas, California, USA, May 9, 2022. REUTERS/Mike Blake

WASHINGTON (Reuters) – U.S. business activity contracted for the third month in a row in September, but the pace of decline slowed as improved global supply chains eased corporate inflationary pressures.

S&P Global said Friday that the Flash US Composite PMI output index, which tracks the manufacturing and services sectors, rose to 49.3 this month from its last reading of 44.6 in August.

Any number below 50 indicates a shrinking private sector. Aside from the slump caused by the first wave of the COVID-19 pandemic in the spring of 2020, business output in the third quarter was the weakest since the global financial crisis of 2007-2009.

However, the S&P Global survey may have exaggerated the slowdown in economic activity. A study by the Institute for Supply Management found that manufacturing and services have grown steadily so far this year, challenging the idea that the economy is in recession.

Gross domestic product contracted in the first and second quarters, but the income side of the growth ledger showed the economy growing at a moderate pace during that period.

The economy is slowing as the Federal Reserve aggressively tightens monetary policy to cool demand and return inflation to the US Central Bank’s 2% target.

The Fed hiked rates by 75 basis points on Wednesday, making it the third straight rate hike of that magnitude. This indicates a further significant increase is expected this year.

The Flash Composite New Orders Index rebounded to 51.2 from its last August reading of 47.4.

A survey measure of the price paid by businesses for inputs fell from its final reading of 70.5 in August to 66.8, the lowest since January 2021, reflecting an easing of supply bottlenecks. . Companies also haven’t raised the prices of their products as much as they did earlier this year, in part due to slowing demand.

The survey’s flash manufacturing PMI has tweaked to 51.8 this month from 51.5 in August. Economists polled by Reuters had expected the index to fall to 51.1. New orders in September increased for the first time in four months.

Manufacturers’ average operating costs rose at their slowest pace since November 2020 this month as input price gains slowed.

The PMI for the flash services sector in the survey rose to 49.2 from 43.7 in August. The services business also reported easing input prices as the cost of some materials fell.

Companies passed on cost savings to their customers whenever possible. If this trend continues, inflation could fall in the coming months. August annual consumer prices he rose 8.3%.

Reported by Lucia Mutikani.Edited by Chiju Nomiyama

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