US business activity experienced a decline in April, dropping to a four-month low. The slowdown was attributed to weaker demand, with the S&P Global US Composite PMI Output Index falling to 50.9 from 52.1 in March. The index, which measures activity in both the manufacturing and services sectors, indicated a slowdown in growth rates for both sectors.
In the manufacturing sector, activity contracted, with the S&P Global US Manufacturing PMI falling to 49.9. New orders declined, while employment growth slowed and supply chains showed signs of spare capacity. In the services sector, activity also slowed, with the S&P Global US Services PMI dipping to 50.9 from 51.7 in March.
Despite the slowdown, inflation remained elevated, although it showed signs of easing. The survey’s measure of prices paid for inputs declined slightly to 56.5, but remained high. However, the output prices gauge fell to 54.1, indicating that businesses are passing on less of their higher costs to consumers.
The cooling of demand and labor market conditions helped ease price pressures, with the April survey recording a welcome easing in rates of increase for selling prices. Firms’ future output expectations also slipped to a five-month low amid concerns about the economic outlook.
The slowdown in US business activity suggests that the Federal Reserve’s interest rate hikes may be having an impact on the economy. The Fed is expected to leave its policy rate unchanged at its next meeting, but has indicated that it may need to keep rates restrictive for longer to bring inflation down to its 2% target.
