Business Outlook Clouded by Inflation

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“We expect the housing and autos sectors to face the greatest near-term pressure on operating fundamentals due to higher financing costs weighing on consumers,” Fitch Ratings said.

Regarding U.S. business output, the S&P said in its outlook survey that the latest data “signaled weaker optimism regarding the year-ahead outlook for output among U.S. private sector firms in October.”

“The net balance of companies anticipating higher activity, at plus 23 percent, was the lowest since June 2020,” the authors of the report noted. “That said, it was stronger than the global average . The drop in expectations was largely driven by the service sector, where optimism fell to its lowest in over two years. Manufacturers, on the other hand, were more upbeat than in June.

But there are opportunities for growth — for businesses willing to diversify their product offerings or shift to more competitive pricing. Those surveyed also noted “that they aim to keep staffing costs down in an effort to dissuade companies from taking operations offshore.” Siân Jones, a senior economist at S&P Global Market Intelligence, said the U.S. private sector firms “remained cautious in their expectations for output over the next year in October, as the impact of inflation and muted client demand weighed on sentiment. Less upbeat predictions for activity, employment and investment stemmed from lower optimism among service providers. Overall, confidence was the weakest since the initial pandemic lockdown period in mid-2020.

 

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