U.S. business activity shrank in July for the first time since 2020 as the manufacturing and services sectors grappled with sluggish demand that heightened recession concerns.
Notably, S&P Global’s preliminary composite PMI fell 4.8 points to 47.5, the lowest level seen since May 2020 amid the pandemic.
Characteristically, excluding the first months of the pandemic with strict lockdowns, the reading was the lowest since the 2009 global financial crisis.
Remember that 50 points separates growth from contraction.
In services, the sector continued its downward path from March’s high as inflation weighed on new sales, while in manufacturing new orders fell with output levels unchanged.
“The preliminary PMI data for July shows a worrying deterioration in the economy,” said S&P Global Market Intelligence Chief Economist Chris Williamson.
“Manufacturing has frozen and the services sector’s recovery from the pandemic has been reversed as demand is weighed down by rising living costs, higher interest rates and a negative economic outlook,” Williamson added.
The contraction in business activity in the US came mainly from a sharp decline in activity in the services sector with the sector’s index falling to 47 points, although its companies continued to add jobs at a steady pace.
Meanwhile, the manufacturing index fell to a two-year low of 52.3 in July. New orders fell for a second month and the pace of job growth slowed.
Export orders also shrank as a stronger dollar and a gloomy global outlook weighed on international demand.
At the same time, however, inflationary pressures eased somewhat, although they remained at high levels. The composite index of input prices fell to a six-month low, while the measure of producer prices was at its lowest since March 2021.
Business expectations for the future also worsened, falling to their lowest level since 2020 as weaker demand and inflation weigh on sentiment.
It is noted that similar trends were shown earlier today by the Eurozone PMI, which fell to a 17-month low in July.
Source: Capital
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