Business activity in the US weakens again

Business activity in the US has been declining for the fourth month in a row. At the same time, manufacturers and service firms report weaker customer demand, the latest signs of a slowdown in the economy in the face of high inflation and rising interest rates.

According to S&P Global, the US Composite PMI, which tracks the manufacturing and services sectors, fell to 47.3 in October from 49.5 in September.

A reading below 50 indicates a contraction in the private sector. Except for the downturn during the first wave of the COVID-19 pandemic in the spring of 2020, output is declining at the fastest pace since the global financial crisis of 2007-2008.

S&P Chief Business Economist Chris Williamson stated that the US economic downturn has accelerated significantly, and confidence in the outlook has deteriorated sharply. The slowdown in business activity was caused by a decrease in activity in the services sector due to rising costs of living and tightening financial conditions.

But the S&P Global poll may exaggerate the slowdown. According to surveys conducted by the Institute of Supply Management, the manufacturing and service industries continued to grow during September.

Although GDP contracted in the first and second quarters, company revenues grew at a quite moderate pace during this time period. Overall revenue growth is likely to pick up again in the third quarter. Estimates of economists polled by Reuters on GDP for the third quarter range from 0.8% to 3.7%, with an average estimate of 2.4%.

However, the economy is slowing as the Fed aggressively tightens monetary policy to dampen demand and bring inflation back to its 2% target.

In September, flash composite new orders index fell to 49.0 from 50.9.

During the month of September, the survey's flash services sector PMI fell to 46.6 from 49.3. Service businesses reported that both prices paid and collected rose in October after a steady decline since late spring, reflecting an uneven decline in inflationary pressures.