Activity in the manufacturing sector of the world’s largest economy, the United States moderated from 57 in May to 52.4 in June, representing a 23-month low, according to the latest data from S&P Global Composite Purchasing Managers Index released on Thursday.
While a number above the 50 mark indicates expansion, data from the sector showed a broad-based decline. Factory production and new orders contracted for the first time since July 2020. Highlighting the negative effect of the rising inflation rate and interest rate on demand.
Also, new sales of goods and services declined for the first time since May and July 2020, respectively.
Similarly, new export orders contracted at the steepest pace since June 2020 as foreign customers paused or reduced new order placements due to inflation and supply chain disruptions.
Again, business confidence slumped to one of the greatest extents seen since comparable data were available in 2012, down to the lowest since September 2020. Manufacturers and service providers were far less upbeat regarding the outlook for output over the coming year than in May, principally amid inflationary concerns and the further impacts on customer spending as well as tightening financial conditions.
Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said: “The pace of US economic growth has slowed sharply in June, with deteriorating forward-looking indicators setting the scene for an economic contraction in the third quarter. The survey data are consistent with the economy expanding at an annualized rate of less than 1% in June, with the goods-producing sector already in decline and the vast service sector slowing sharply.
“Having enjoyed a mini-boom from consumers returning after the relaxation of pandemic restrictions, many services firms are now seeing households increasingly struggle with the rising cost of living, with producers of non-essential goods seeing a similar drop in orders.”
