US business activity shrinks again in October
By Michele Maatouk
Date: Monday 24 Oct 2022
(Sharecast News) - Business activity in the US shrank again in October as demand weakened amid high inflation, according to a survey released on Monday.
The S&P Global flash composite output index - which measures activity in both the services and manufacturing sector - fell to 47.3 from 49.5 in September, hitting a two-month low. This marked the fourth month in a row the reading came in below 50.0, which is the level that separates contraction from expansion.
The flash manufacturing purchasing managers' index printed at 49.9 in October, down from 52.0 a month earlier and reaching a 28-month low. Meanwhile, the PMI for the services sector declined to 46.6 from 49.3 - a two-month low.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said the US economic downturn gathered "significant" momentum in October, while confidence in the outlook also deteriorated sharply.
"The decline was led by a downward lurch in services activity, fuelled by the rising cost of living and tightening financial conditions. While output in manufacturing remains more resilient for now, October saw a steep drop in demand for goods, meaning current output is only being maintained by firms eating into backlogs of previously placed orders. Clearly this is unsustainable absent of a revival in demand, and it's no surprise to see firms cutting back sharply on their input buying to prepare for lower output in coming months.
"One upside of this drop in input buying has been a further alleviation of supply constraints, which alongside the stronger dollar have helped cool price pressures in the manufacturing sector.
"Although price pressures picked up slightly in the service sector due to high food, energy and staff costs, as well as rising borrowing costs, increased competitive forces meant average prices charged for services grew at only a fractionally faster rate. Combined with the easing of price pressures in the goods-producing sector, this adds to evidence that consumer price inflation should cool in coming months."
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