A survey of purchasing managers showed business activity continued to contract this month as client demand remained subdued and high inflation weighed on client spending.
The S&P Global Flash US Composite Purchasing Managers’ Index (PMI) came in at 46.6 in January, up from 45.0 in December and the highest in three months. The reading remained below 50, pointing to contraction in output. PMI readings for services activity, manufacturing and manufacturing output also rose, but were also below 50.
The U.S. economy started the new year on a “disappointingly weak tone,” said Chris Williamson, chief business economist at S&P Global Market Intelligence. He noted that while the decline in business activity slowed slightly from December, it was the largest since the global financial crisis.
lack of confidence
Overall participant confidence continues to be low by historical standards due to the lingering impact of high prices and rising interest rates, as well as lingering concerns about supply and labor shortages, Williamson explained.
He noted that the acceleration in input cost inflation was partly related to rising wages. That has raised concerns that the Fed will be encouraged to tighten monetary policy more aggressively despite rising recession risks.