U.S. business activity contracts in July for first time in 2 years, survey shows

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U.S. Composite PMI Output Index had tumbled far more than expected to 47.5 this month from a final reading of 52.3 in June

. With a reading below 50 indicating business activity had contracted, it is a development likely to feed into a vocal debate over whether the U.S. economy is back in – or near – a recession after rebounding sharply from the downturn in early 2020 at the start of the COVID-19 pandemic.

Economists polled by Reuters had a median estimate for the services sector index at 52.6, while the manufacturing index was seen coming in at 52.0. S&P Global’s measures of new orders in the manufacturing sector, outstanding business in the services sector and future expectations in both fell to levels not seen since the first year of the pandemic.

The S&P Global data point to U.S. gross domestic product falling at roughly a 1% annualized rate, Williamson said. The economy contracted at a 1.6% rate in the first quarter, largely because of business inventory management issues, and the government next week will provide its first reading of output in the second quarter, which some models suggest will show a second straight contraction.

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