By Xavier Fontdegloria
The U.S. economy slowed in June to a five-month low as demand in both the manufacturing and services sector declined amid high inflation, data from a purchasing managers survey showed Thursday.
The S&P Global Flash Composite Output Index fell to 51.2 in June from 53.6 in May, its lowest since January. The indicator--which gauges activity in both the manufacturing and services sectors--suggests that activity continued to expand, but just slightly as the reading is barely above the 50.0 no change threshold.
The survey showed that activity in both the factory and services sector weakened markedly, with production among manufacturers declining for the first time since the onset of the Covid-19 pandemic.
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, said Chris Williamson, chief business economist at S&P Global. The survey's deteriorating forward-looking indicators set the stage for an economic contraction in the third quarter, he said.
Both manufacturers and services providers reported faltering demand due to the rising cost of living and falling confidence, leading to the first contraction in new orders since July 2020.
"There has ... been a remarkable drop in demand for goods and services during June compared to prior months," Mr. Williamson said.
The survey showed that the services sector continued to grow over the month, but firms noted that the postpandemic boom is fading.
The flash U.S. services PMI fell to 51.6 in June from 53.4 in May, a five-month low and missing the 53.3 consensus forecast from economists polled by The Wall Street Journal.
Goods producers reported the weakest growth in almost two years as both production and new orders declined. The flash U.S. manufacturing PMI decreased to 52.4 in June from 57.0 in May, below economists' estimates of 56.0.
The survey data also signaled that the prices continued to rise, but at a slower pace compared with previous months.
"A corollary of the drop in demand was less pressure on prices, with the survey's inflation gauges for firms' costs and their selling prices falling sharply in June to suggest that, although still elevated, price pressures have peaked," Mr. Williamson said.
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(END) Dow Jones Newswires
June 23, 2022 10:24 ET (14:24 GMT)Copyright (c) 2022 Dow Jones & Company, Inc.