News Tech: Aug 23 (Reuters) – U.S. private-sector business activity contracted for a second straight month in August to its weakest in 18 months with particular softness registered in the services sector as demand weakened in the face of inflation and tighter financial conditions.
The falloff was more notable in services, where that sector’s PMI dropped to 44.1 from 47.3 last month, than in factory activity. The survey’s manufacturing gauge still showed modest expansion at 51.3 verus July’s 52.2.
The S&P Global flash composite purchasing managers index (PMI) for August dropped to 45 this month – the lowest since February 2021 – from a final reading of 47.7 in July. A reading below 50 indicates a contraction in activity.
Both were the lowest since mid-2020 and were also below the median estimate in a poll of Reuters economists, with the services reading coming in well below the consensus forecast of 49.2. The factory activity estimate was 52.
The drop in demand reflected in the PMI surveys is exactly what the Federal Reserve is trying to engineer with the stiffest run of interest rate increases since the 1980s. With inflation also running near a 40-year high, it has risen rates from near zero in March to their current range of 2.25% to 2.50% and officials project more to come in the months ahead.
RegisterReporting by Dan Burns; Editing by Chizu Nomiyama Source: Reuters Trust Principles.