Business activity growth in the United States cooled in June. The manufacturing sector contracted for the third straight month. The S&P Global flash US Composite PMI Output Index fell to 51.2 in June from 53.6 in May. This indicates a slowdown in growth. The index has been below 50 for two consecutive months, signaling contraction.
The manufacturing sector’s growth declined in June, as the flash manufacturing PMI Output Index fell from 50.7 to 49.2 compared to May. New orders, output, and employment also saw significant declines. On the other hand, the services sector showed improvement, as the flash services PMI rose to 53.4 from 52.7 in May. However, the pace of growth in the services sector slowed compared to April, indicating a potential softening of demand.
The slowdown in business activity growth is likely due to multiple factors. These include rising interest rates and the war in Ukraine. Ongoing supply chain disruptions are also contributing to the slowdown. With interest rates on the rise, businesses find it costlier to borrow money.
The slowdown in business activity growth indicates a cooling US economy. It’s premature to predict a recession. The Federal Reserve plans to raise interest rates to fight inflation, potentially slowing economic growth. The Fed also aims for slower but steady growth as inflation returns to target levels.
The slowdown in business activity growth could lead to lower corporate earnings and stock prices. Investors should be prepared for increased volatility in the stock market in the coming months.
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