The US economy is showing signs of losing momentum as business activity growth slowed down in August, according to a survey by S&P Global Market Intelligence. The survey, which measures both manufacturing and service sectors, revealed that the composite PMI index fell to 50.4, barely above the threshold of 50 that separates expansion and contraction.
The service sector, which accounts for most of the US economy, saw a decline in new business demand, while the manufacturing sector contracted for the fourth consecutive month. The slowdown in the US economy weighed on the US dollar, which lost ground against the pound and other major currencies.
“A near-stalling of business activity in August raises doubts over the strength of U.S. economic growth in the third quarter. The survey shows that the service sector-led acceleration of growth in the second quarter has faded, accompanied by a further fall in factory output,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.
In its July survey, S&P Global said its preliminary US Manufacturing PMI rose for the first time in three months to 49.0 from a drop to a 46.3 reading seen in June. The Services PMI Index, however, fell to 52.0 in July when compared to June’s 53.2. The PMI readings suggested that the US economy grew at a slower pace at the beginning of the third quarter.
The slowdown in business activity raises concerns about the strength of US economic growth in Q3. The most recent PMI data indicates that smaller businesses are being hit harder by the slowdown compared to larger ones. Smaller firms experienced a greater decline in output than larger companies, marking the first time this has happened since comparable data became available in late-2009.
The survey revealed that business confidence among private sector firms in the US dropped to its lowest level since comparable data became available in 2012. Williamson stated that the pessimistic outlook reflects worries about the effects of trade wars, geopolitical uncertainty, and decreased domestic demand on future business performance.
Commenting on the July survey findings, Chris Williamson,,said that ”there were several other encouraging bright spots in the survey, most notably including a marked improvement in business expectations for output in the year ahead. Firms are therefore anticipating the current soft patch to soon pass, and importantly are hiring more staff as a result.”
“There was also good news on the inflation front. The combination of weak demand and improved supply led to a further “buyers’ market” for many goods. Prices charged for goods consequently barely rose for a third straight month, which should help subdue consumer price inflation in the near term,” Williamson added.
The survey findings align with other indicators indicating a slowdown of the US economy due to increasing trade tensions and global challenges. The Federal Reserve has lowered interest rates twice this year to bolster the economy, but some analysts suggest that additional stimulus might be necessary to avert a further deceleration or potential recession.
Relevant articles:
- US Economy Near Stalling Point as Consumer Demand Weakens, Survey Says, U.S. News & World Report, Aug. 23, 2023
- Pound US Dollar Attempts Recovery amid Downbeat US PMIs, TorFX News, Aug. 23, 2023
- PMI Data Hints at Slowdown for Main Street Smaller Businesses, PYMNTS.com, Aug. 23, 2023
- US PMIs: S&P Manufacturing PMI falls to 47 in August, Composite PMI …, FXStreet, Aug. 23, 2023