US business activity shrinks for first time since mid-2020 in July, S&P Global says
Business activity in the US shrank unexpectedly in July for the first time since mid-2020, the results of two closely-followed surveys revealed.
S&P Global's services sector Purchasing Managers' Index declined from a reading of 52.7 for June to 47.0 in July (consensus: 51.0).
The comparable PMI for manufacturing however fared a tad better than expected, printing at 52.3, down from June's level of 52.7 but above the 52.0 forecast by economists.
A composite index tracking output levels in both factory and services meanwhile fell from 52.3 to 47.5.
Output within manufacturing was also marginally lower with the corresponding sub-index coming in at 49.9, versus 50.2 in the month before.
"Companies noted that weak demand conditions stemmed from severe inflationary pressures and hikes in interest rates, which have exerted further strain on domestic client spending. Foreign client demand also weakened, causing new export orders to fall for a second successive month," the survey compiler said in a statement.
"An increased rate of order book deterioration, with backlogs of work dropping sharply in July, reflects an excess of operating capacity relative to demand growth and points to output across both manufacturing and services being cut back further in coming months unless demand revives," said Chris Williamson, chief business economist at S&P Global Market Intelligence.
"However, with companies’ expectations of future growth slumping to the lowest since the early days of the pandemic, any such revival is not being anticipated. Instead, firms are already reassessing their production and workforce needs, resulting in slower employment growth."