(Bloomberg) -- US business activity stagnated in early September, driven by a further moderation in demand at service providers.
The S&P Global flash composite output index decreased 0.1 point to 50.1 in September, the lowest level since early this year, the group reported Friday. A reading of 50 demarcates the line between expansion and contraction.
While the manufacturing sector shrank at a slower rate, business activity at service providers crept even closer to stagnation — at 50.2. New orders and expectations of future activity both slumped to the worst this year.
“PMI data for September added to concerns regarding the trajectory of demand conditions in the US economy following interest rate hikes and elevated inflation,” Siân Jones, principal economist at S&P Global Market Intelligence, said in a statement.
Employment growth, however, quickened, with companies noting a greater ease filling open positions and, in some cases, better retention.
“The boost to hiring from rising candidate availability may not be sustained amid evidence of burgeoning spare capacity and dwindling backlogs which have previously supported workloads,” Jones said.
Input prices grew at a faster pace in September, reflecting rising wages as well as high costs for borrowing and fuel. That said, the report indicated firms couldn’t easily pass those cost increases onto consumers due to soft demand and reduced purchasing power.
Backlogs of work shrank at the fastest pace since May 2020, reinforcing a picture of cooler demand. As such, manufacturers depleted inventories at the second-fastest pace in nearly two years.
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