U.S. Business Activity Contracts for First Time Since June 2020 - PMIs

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U.S. Business Activity Contracts for First Time Since June 2020 - PMIs
Credit: © Reuters.

By Scott Kanowsky 

Investing.com -- U.S. business activity contracted for the first time in more than two years in July, according to a closely watched survey of companies, as weak service sector performance and a decline in manufacturing production added to fears of a broad economic downturn in the world's biggest economy.

S&P Global said its U.S. flash purchasing managers' index - a measure of momentum in business activity - slumped to 47.5 during the period, the lowest level in 26 months and the first sub-50 reading since June 2020. Any figure below 50 denotes contraction.

Firms revealed that new orders grew modestly in July, but complained that client demand has been strained by soaring inflation and rising interest rates.

Input costs at suppliers also ticked higher due to surging fuel, transportation and raw material expenses. But signs are beginning to emerge that price hikes are easing back from their May peak, S&P Global said.

“Although supply constraints remained problematic, constraining economic activity, the weakening demand environment has helped to alleviate inflationary pressures," said Chris Williamson, chief business economist at S&P Global Market Intelligence.

Meanwhile, the outlook for a revival in demand darkened in July. Company expectations for the future tumbled to the lowest since the early days of the pandemic, according to S&P Global, forcing some businesses to reassess their staff sizes and overall strategies.

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