US business activity expanded in early August at the weakest pace in six months, inching closer to stagnation amid sluggish demand.
(Bloomberg) — US business activity expanded in early August at the weakest pace in six months, inching closer to stagnation amid sluggish demand.
The S&P Global flash composite output index fell 1.6 points to 50.4 in August as manufacturing continued to shrink and services activity cooled, the group reported Wednesday. Readings above 50 indicate growth.
The figure raises concerns about the durability of the recent strength in retail sales. Service-sector activity slowed to the weakest pace in six months, and new business at both factories and services providers deteriorated.
“Companies report that demand is looking increasingly lethargic in the face of high prices and rising interest rates,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a statement.
“A resultant fall in new orders received by firms in August could tip output into contraction in September as firms adjust operating capacity in line with the deteriorating demand environment,” Williamson said.
The report offered mixed news on inflation. Costs of wages and materials accelerated, but growth in prices charged eased slightly as companies tried to stoke demand for goods and services.
In Europe, private-sector activity shrank at a fastest pace since November 2020, according to separate S&P Global data for the euro area.
Read more: Euro Area’s Worsening Downturn Fuels Bets on ECB September Pause
Tepid demand, fewer orders and shrinking backlogs prompted some US companies to reduce staffing levels and others to rein in hiring. The group’s measure of employment came close to stagnating as a result, retreating to its lowest level since mid-2020.
On a brighter note, companies were more upbeat about the outlook, buoyed by hopes of a stabilization in interest rates and inflation.
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