U.S. business activity growth slows as services soften

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U.S. business activity slowed to a five-month low in July, dragged down by decelerating service-sector growth, closely watched survey data on Monday showed. | Reuters

The slowdown may be viewed positively at the Fed, which is keen to see activity cool to lower inflation. On Wednesday policymakers are expected to raise interest rates by a quarter percentage point, to between 5.25 percent and 5.5 percent, in what many investors and economists see as potentially their last increase of the current cycle.

The services activity index fell to 52.4 from 54.4 in June and was weaker than the reading of 54 expected among economists in a Reuters poll. The survey’s manufacturing output index, meanwhile, experienced growth for the first time in two months, rising to 50.2 from a contracting rate of 46.9 in June. The broader manufacturing PMI index was improved but still in contraction territory at 49 versus 46.3 last month and topped economists’ forecast for 46.2.There were several signs in the report that suggested the Fed’s interest rate hikes might be making progress towards taming inflation that remains well above its 2 percent target.

“The darkening picture adds downside risks to output growth in the coming months which, alongside the slowing in the pace of expansion in July, will keep alive fear that the U.S. economy may yet succumb to another downturn before the year is out,” said Williamson.Subscribe to our daily newsletter

 

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