US business slump deepens as more-than-expected manufacturing and service contracts close

Business activity in the United States fell for the fifth straight month in November, with manufacturing and services sectors posting declines, according to a recent report from S&P Global.

According to an S&P news release on Nov. 23, the Flash US PMI Composite Output Index came in at 46.3 in November, up from 48.2 at the start of the fourth quarter. This was the “strongest” rate of contraction since August of this year and the fastest since 2009. Scores above 50 indicate improvement, while scores below 50 indicate contraction. The market consensus was that the composite PMI would only fall to 47.7 for the month, according to data from FX Street.

“Lower production was seen in both manufacturing and services as demand continued to fall. The overall decline in activity was the second-fastest since May 2020 as inflation, rising borrowing costs and economic uncertainty weighed on demand,” the release said.

The Flash US Services Business Activity Index came in at 46.1, down from the 47.8 recorded last month and below the expected level of 47.9. This is the second-fastest decline on record, barring the first phase of the pandemic in 2020.

The service industry is believed to have been impacted by high inflation and interest rates, which have negatively impacted customers’ disposable income and hence demand conditions.

Flash US manufacturing PMI slipped to 47.6 in November from 50.4 in October, indicating a “renewed decline” in operating conditions for manufacturers. This is well below market expectations of 50.

There was a “return drop” in production, as well as a sharper drop in orders. New sales fell at the fastest rate since May 2020.

Economic crisis, recession

According to Chris Williamson, chief business economist at S&P Global Market Intelligence, deteriorating business conditions in the country and falling demand and output amid rising rates are “consistent” with the American economy shrinking by 1 percent annually, according to the assessment.

“Companies are reporting mounting headwinds from rising living costs, tightening financial conditions – particularly higher borrowing costs – and weaker demand in both domestic and export markets,” he said in the release.

Meanwhile, the US economy could be headed for a recession, according to the Conference Board Leading Economic Index (LEI), which remained in the red last month. This was the eighth straight monthly decline.

The decline in the LEI is a reflection of “the deteriorating consumer outlook amid high inflation and rising interest rates, as well as declining prospects for housing and manufacturing,” said Ataman Ozyildirim, senior director, economics, at The Conference Board, in a May 11 note 18 press release.

In a recent interview with CNN, Amazon founder Jeff Bezos said the United States is either already in a recession or may be in a recession “very soon.” He advised small businesses and consumers to reduce risk and hold more cash.

Naveen Atrappully

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Naveen Athrappully is a news reporter at The Epoch Times, covering business and world events.

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