People stand outside Starbucks on the Upper West Side amid the coronavirus pandemic on March 23, 2021 in New York City.
Photo by Noam Galai/Getty Images
- S&P Global’s index of US business output dropped to 55.1 in April from 57.7, according to a Friday report.
- That missed the median estimate of 57.0 and marked the weakest growth in three months.
- Firms cited concerns around the Russia-Ukraine war, inflation, and lingering supply-chain issues.
The post-Omicron rebound is all but over, with sky-high inflation the newest snag dragging on the US recovery.
A new survey of US businesses shows the pace of improvement slowing through April as inflation remained worryingly high and spending softened. The S&P Global US Composite Output Index — a nationwide survey of businesses managers — dropped to 55.1 in April from 57.7, according to data out Friday morning. That landed below the median forecast of 57.0 from economists surveyed by Bloomberg and reflected the slowest growth rate in three months.
The survey, known as a purchasing managers’ index, tracks the pace of change in the economy. Readings above 50 indicate expansion, and higher readings signal a faster growth rate. Prints below 50 signal the economy is contracting.
The report also revealed a split in which kinds of businesses are recovering the fastest. Manufacturers fared well through April, with the sector-specific PMI rising to 59.7 from 58.8. The measure was boosted by strong improvements to operating conditions, new orders, and overall output, according to the report. New export orders also jumped the most in nearly a year. Still, inflation dampened sentiments and businesses cited concerns around ever-climbing prices and geopolitical uncertainty.
Services, meanwhile, saw growth cool. The sector’s PMI dipped to 54.7 from 58.0, still signaling growth but revealing a hefty deceleration as soaring costs slammed managers. Supply shortages and elevated inflation reined in spending activity, leaving firms with less revenue while cost burdens continued to increase.
“Many businesses continue to report a tailwind of pent-up demand from the pandemic, but companies are also facing mounting challenges from rising inflation and the cost of living squeeze, as well as persistent supply chain delays and labor constraints,” Chris Williamson, chief business economist at S&P Global, said.
The Friday report adds to signs that the US recovery is losing steam after surging through 2021. Retail sales data published earlier in April showed spending rising less than expected in March and at a slower pace than seen through February. Job creation, while still stronger than average, has slowed as the US creeps closer to its pre-pandemic payroll count. Forecasts for 2022 gross domestic product also point to a sizeable cooling from last year’s rate.
The slowdown extends beyond the US, too. The World Bank lowered its projections for global economic growth on Monday, citing the Russia-Ukraine conflict for its gloomier outlook toward the world’s recovery. The organization now sees global gross domestic product growing 3.2% through 2022, down from its January estimate of 4.1%. Should the projection come to fruition, global growth would be around half the 5.7% pace seen through 2021.
Recoveries aren’t yet on the ropes, and the Friday reports show US manufacturers and service businesses both growing at a still-healthy pace. But with war in Ukraine driving inflation higher and roiling supply chains further, the strong rebound seen through early 2022 is fading fast.
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