U.S. business activity slowed considerably in June as high inflation and declining consumer confidence dampened demand across the board, resulting in a gauge of new orders contracting for the first time in nearly two years.
A reading above 50 indicates expansion in the private sector. Though the economy appears to have rebounded from the first-quarter slump, which was largely driven by a record trade deficit, the index suggested that momentum was slowing. It aligned with recent weakness in retail sales, housing starts, building permits, home sales and regional manufacturing.
The U.S. central bank last week raised its policy rate by three-quarters of a percentage point, its biggest hike since 1994. The Fed has increased its benchmark overnight interest rate by 150 basis points since March. That is stoking fears that the economy could stall or tip into recession next year.
Weakening demand, however, led to some moderation in prices for both inputs and finished products. Still, inflation at factories and services industries remained high.