US economy weakens again in October – S&P Global survey

Oct 24 (Reuters) – US business activity shrank for a fourth straight month in October, with manufacturers and services companies both reporting weaker customer demand in a monthly survey of purchasing managers, the latest evidence the economy is slowing amid high inflation and rising Interest charges.

S&P Global said on Monday that its flash US composite PMI output index, which tracks manufacturing and services, fell to 47.3 this month, from 49.5 in September .

A reading below 50 indicates a contraction in the private sector. Barring the slump during the first wave of the COVID-19 pandemic in spring 2020, economic output is declining at the fastest pace since the 2007-2009 global financial crisis, at least by S&P Global’s standards.

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“The US economic downturn gained significant momentum in October, while confidence in the outlook also deteriorated sharply,” S&P chief business economist Chris Williamson said in a statement. “The decline was led by a downward trend in service activity, fueled by the rising cost of living and tightening financial conditions.”

But the S&P Global survey could exaggerate the slowdown. Competing surveys by the Institute for Supply Management showed that manufacturing and service industries are still expanding into September.

Although gross domestic product contracted in the first and second quarters, the income side of the growth book showed that the economy grew at a moderate pace over the period, and overall expansion is likely to resume in the third quarter. Estimates among economists polled by Reuters for the first reading of third-quarter GDP expected by the Commerce Department on Thursday range from a compound annual growth rate of 0.8% to 3.7%, with a median estimate of 2, 4%

However, the economy is slowing as the Federal Reserve aggressively tightens monetary policy to cool demand and bring inflation back to the Federal Reserve’s 2% target.

The Fed raised interest rates by 75 basis points in September, the third straight hike of this magnitude, and a quarter of that magnitude is expected at next week’s policy-setting meeting, although policymakers’ aggressiveness afterwards is seen as one of them the issues to be discussed at the meeting on 1st and 2nd November.

The flash composite index of new orders slipped to 49.0 from a late reading of 50.9 in September.

The survey’s measure of the prices firms pay for inputs rose to 67.8 from 67.3, which was the lowest level since January 2021, reflecting the uneven pace of easing supply shortages. Companies are also not raising the prices of their products as much as they did earlier in the year, partly due to slowing demand.

The survey’s flash manufacturing PMI fell to 49.9 this month from 52.0 in September, the first decline since June 2020. Economists polled by Reuters had forecast the index to fall to 51.0. Orders fell sharply to their lowest level since the COVID lockdowns in spring 2020.

The survey’s flash services sector PMI fell to 46.6 from 49.3 in September. Service firms reported that both purchase prices and calculated prices rose in October after falling steadily since late spring, reflecting the uneven pace of easing inflationary pressures.

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Reporting by Dan Burns; Editing by Andrea Ricci

Our standards: The Thomson Reuters Trust Principles.

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