WASHINGTON (Market Watch) - U.S. business activity slowed moderately in May as higher prices cooled demand for services while renewed supply constraints because of COVID-19 lockdowns in China and the ongoing conflict in Ukraine hampered production at factories.
S&P Global said on Tuesday its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors; fell to a reading of 53.8 this month from 56.0 in April.
That growth pace, which was the slowest in four months, was attributed to “elevated inflationary pressures, a further deterioration in supplier delivery times and weaker growth.”
A reading above 50 indicates expansion in the private sector.” The index remains consistent with strong economic growth halfway through the second quarter. The economy contracted in the first quarter under the weight of a record trade deficit, although domestic demand remained solid as households increased spending and businesses ramped up investment in equipment.
Annual consumer prices have increased at their fastest pace in 40 years, prompting the Federal Reserve to start raising interest rates in March and increasingly adopt an aggressive monetary policy posture. The hikes and tightening financial conditions have raised fears of a recession next year.
The flash composite orders index slipped to 54.4 this month from 56 in April.
“Companies report that demand is coming under pressure from concerns over the cost of living, higher interest rates and a broader economic slowdown,” said Chris Williamson, chief business economist at S&P Global Market Intelligence
The survey’s flash manufacturing PMI decreased to a reading of 57.5 his month from 59.2 in April. That was in line with economists’ expectations. . Manufacturing accounts for 12% of the economy.