U.S. business activity nudged down in September, with gains at factories offset by a retreat at services industries, suggesting a loss of momentum in the economy as the third quarter draws to a close and the COVID-19 lingers.
Data firm IHS Markit said on Wednesday its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, slipped to a reading of 54.4 this month from 54.6 in August. A reading above 50 indicates growth in private sector output. Though the private sector continues to expand, this month’s dip in the index support expectations of an ebb in economic momentum as the boost from fiscal stimulus ebbs.
Gross domestic product is expected to rebound at as much as a record 32% annualized rate in the third quarter after tumbling at a 31.7% rate in the April-June period, the worst performance since the government started keeping records in 1947.
The coronavirus crisis wiped out more than five years of growth, and economists are calling for another aid package from the government to help the fragile recovery. The economy slipped into recession in February.
“The question now turns to whether the economy’s strong performance can be sustained into the fourth quarter,” said Chris Williamson, chief business economist at IHS Markit, noting that the uncertainty over the Nov. 3 presidential election had also risen. “Risks therefore seem tilted to the downside for the coming months, as businesses await clarity with respect to both the path of the pandemic and the election.”
Six months after the COVID-19 pandemic started in the United States, coronavirus cases remain high, with the death toll in the country exceeding 200,000 on Tuesday - by far the highest number of any nation.
The survey’s services sector flash PMI fell to 54.6 this month from a reading of 55.0 in August. Economists polled by Reuters had forecast a reading of 54.7 this month for the services sector, which accounts for more than two-thirds of the U.S. economy. The services industry has been hardest hit by the virus and remains below its pre-pandemic level.
A measure of service industry employment slipped this month.
In contrast, manufacturing firms signaled an acceleration in activity. The flash manufacturing PMI increased to 53.5 this month from 53.1 in August. Economists had forecast the index for the sector, which accounts for 11% of the economy, advancing to 53.1 in August. A measure of new orders received by factories edged down to a reading of 54 from 54.1 in August. (Reporting by Lucia Mutikani, Editing by Chizu Nomiyama)
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