US business activity remains subdued in September – S&P Global Survey

US business activity remains subdued in September – S&P Global Survey

On the window of an IN-N-OUT fast food restaurant in Encinitas, California, USA, May 9, 2022, there is a sign that reads “Employing Now.” REUTERS/Mike Blake

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WASHINGTON, Sept. 23 (Reuters) – US business activity shrank for the third straight month in September, although the pace of the decline slowed, while improving global supply chains eased inflationary pressures on businesses.

S&P Global said Friday that its flash US Composite PMI Output Index, 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 a contraction in the private sector. Excluding the slump during 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.

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However, the S&P Global survey is likely exaggerating the slowdown in economic activity. Studies from the Institute for Supply Management have shown that the manufacturing and services sector has grown steadily this year so far, which casts doubt on the idea that the economy was in recession.

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

The economy is slowing as the Federal Reserve is aggressively tightening monetary policy to cool demand and bring inflation back to the Federal Reserve’s target of 2%.

The Fed on Wednesday introduced a 75 basis point rate hike, its third consecutive hike of that magnitude. It meant there were more big increases to come this year.

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

The measure of prices paid by companies for inputs in the study fell to 66.8, the lowest level since January 2021, from a final reading of 70.5 in August, as a result of an easing of supply bottlenecks . Companies are also not raising prices for their products as much as they were earlier this year, in part because of dwindling demand.

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

With input price increases easing, average operating costs for manufacturers rose this month at the slowest pace since November 2020.

The flash services industry PMI in the survey rose to 49.2 from 43.7 in August. Service companies also reported a moderation in input prices as costs for some materials fell.

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

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