US business activity contracts in July for the first time in 2 years, PMI shows

US business activity contracted for the first time in nearly two years in July, as a sharp slowdown in the services sector offset continued modest growth in manufacturing, painting a grim picture for an economy stunted by high inflation, rising interest rates and deterioration of consumer confidence.

S&P Global said on Friday its preliminary composite US Purchasing Managers’ Index (PMI) fell much more than expected this month to 47.5 from a final reading of 52.3 in June. .

As a reading below 50 indicates a contraction in business activity, this is a development that is likely to fuel a heated debate over whether the U.S. economy is back in — or close to — a recession after having rebounded sharply from the downturn. observed in early 2020, amid the Covid-19 pandemic.

The July PMI decline marked the fourth consecutive monthly decline and was largely driven by pronounced weakness in the services sector, whose index fell to its lowest since May 2020 at 47.0 from 52.7 the previous month. .

This was enough to offset the relative stability in manufacturing, whose index dropped to 52.3 from 52.7 previously, indicating continued growth in the sector, albeit at the weakest pace since July 2020.

Economists polled by Reuters estimated a reading of 52.6 for the services sector and 52.0 for the manufacturing index.

“Preliminary PMI data for July point to a worrying deterioration in the economy,” S&P Global’s chief business economist Chris Williamson said in a statement.

“Excluding the months of pandemic lockdown, production is falling at a rate not seen since 2009, amid the global financial crisis.”