ALBAWABA – A preliminary reading of the Purchasing Managers’ Index (PMI) in the United States (US), released Wednesday by S&P Global, shows the US economy could start shrinking in the coming weeks, news agencies reported.
Standard and Poor’s (S&P) Global’s PMI survey showed that business activities in the US came close to stalling in August, with growth reaching the lowest level since February, according to Sky News Arabia.
Preliminary findings specifically indicate a decline in demand for new business in the huge services sector.
The preliminary composite PMI in the US, which tracks the manufacturing and services sectors, shows the reading fell to 50.4 in August from 52 in July.
This constitutes the largest decline since November 2022, Sky News Arabia reports.
Although the US economy still growing in August, the PMI score is just 0.4 points over the thin line separating growth from contraction. Especially in light of weaker-than-usual demand for manufactured goods and services as well, the news agency reported.
PMI shows US economy could start shrinking in August
The latest economists’ poll by Reuters predicted a score of 52.2 for the service PMI and 49.3 for the manufacturing PMI in August.
PMI survey indicates that US economy could start shrinking soon - Shutterstock
However, service sector business activity growth was the slowest since February, at 51.0 in August, and the Manufacturing PMI fell deeper into contraction at 47.0, down from 49.0 in July, according to Reuters.
Notably, this is the fourth straight month of contraction in the US manufacturing sector’s PMI.
For months, a strong labor market and strong consumer spending mitigated recession fears and both factors led to an upward revision of GDP growth forecasts, Reuters reported.
But data released on Wednesday paints a less optimistic picture, reigniting concerns that the US economy could start shrinking soon.
Nonetheless, Wednesday's cool reading may be viewed positively by the Federal Reserve, which is keen to see activity cool to lower inflation.
