A key poll of business leaders released this week showed that the U.S. economy grew at its slowest rate in six months in August. This meant that the economy was getting closer and closer to being stuck.
In August, the S&P Global flash composite output index dropped 1.6 points to 50.4. This index is a first look at poll data that includes both the services and manufacturing sectors. The manufacturing sector shrank again, and the services sector grew at its slowest rate since February.
The poll shows that customer demand is low all over the country. Total orders went down for the first time in nearly six months. Both U.S. producers and service providers saw their sales go down.
“The fact that business activity almost stopped in August raises questions about how strong US economic growth will be in the third quarter. The poll indicates that the rapid pace of growth during the second quarter, which was led by the service sector, has diminished, and factory output has dropped even more,” said Chris Williamson, chief economist at S&P Global Market Intelligence.
At the same time, businesses had to pay more to make goods and services because price forces were getting stronger. In July, the rate of input price inflation sped up because the prices of fuel, raw materials, and labor all went up. The effect on prices, on the other hand, was lessened by attempts to stay competitive and boost sales.
Chris Williamson said this:
“Companies say that low demand is getting worse because prices are high and interest rates are going up. As a result, firms got fewer new orders in August, which could lead to a drop in output in September as firms changed their working capacity to match the weakening demand. After almost coming to a standstill in August, hiring could soon turn into job loss in the coming months.”
“Rising pay pressures and higher energy prices have made input cost inflation go up, which will make people worry about how stable consumer price inflation will be in the coming months. One good thing is that low demand is beginning to limit the ability to raise prices, which should help keep inflation around the 3% mark.”
The study shows that consumer spending, which has been a big part of the economy’s strength this year, may be slowing down.
Demand for U.S. goods and services is also hurt by weak economies all over the world.
“Low demand from key export markets, specifically Europe, caused new export orders to drop again in August. The drop in demand from foreign clients continues the downward trend that has been going on since June 2022 and was only briefly stopped by a small uptick in July. The drop in exports was mostly caused by manufacturers, whose growth was slower than that of service providers,” said the study.
Even though things are looking better, trust is still below the long-term average. The increase in confidence was caused by the hopes that interest rates would stabilize, the hopes that demand would pick up, and the hopes that price pressures would ease.
Comments are closed.