May PMI data revealed a further slowdown in U.S. private sector output growth in May, as a struggling manufacturing economy was accompanied by a notable downshift in gear in the service sector.
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At 50.9 in May, down from 53.0 in April, the seasonally adjusted IHS Markit Flash U.S. Composite PMI Output Index indicated the slowest expansion in overall business activity since May 2016.
The composite index is based on original data from IHS Markit’s PMI surveys of both services and manufacturing.
The muted rise in output was attributed to softer demand conditions and subdued growth of new orders.
The rise in new business in May was the softest recorded since the series began in October 2009.
Consequently, firms put the brakes on hiring.
The latest increase in employment was only marginal and the smallest for just over two years.
Companies also noted little strain on capacity due to weak demand, and reported the first decline in backlogs of work since June 2017.
Input price inflation eased for the third month running in May, despite continued comments from panellists regarding the ongoing impact of tariffs.
The slower increase in costs and greater competitive pressures underpinned a renewed fall in output charges, the first such decline since February 2016.
U.S. private sector firms meanwhile grew less optimistic of a rise in output over the coming 12 months.
Business expectations fell to their lowest since the series began in July 2012.
Reduced confidence was commonly attributed to hesitation among clients and increased uncertainty, which were both often linked to global trade tensions.
The seasonally adjusted IHS Markit Flash U.S.
Services PMI Business Activity Index posted 50.9 in May, down from 53.0 in April, to indicate a notable slowdown in service sector business activity.
The upturn was only marginal overall and the slowest since the current sequence of expansion began in March 2016.
In line with the slower rise in business activity, new orders increased only slightly, as the rate of growth eased for the third successive month amid softer demand conditions and intense competition.
Subsequently, the level of outstanding business fell for the first time this year and employment growth dipped to a 25-month low.
Meanwhile, the recent trend of subdued inflationary pressures continued in May with input costs rising only slightly.
At the same time, intense competition and a slower rise in costs led to the first fall in output prices since February 2016.
U.S. manufacturers also indicated a slower expansion in output in May amid further signs of relatively subdued demand conditions.
The seasonally adjusted IHS Markit Flash U.S. Manufacturing Purchasing Managers’ Index (PMI) 1 registered 50.6 in May, down from 52.6 in April.
Although the index reading continued to signal an improvement in operating conditions across the manufacturing sector, the upturn was the least marked since September 2009 and only marginal.
Underlying data indicated a broad-based slowdown in the rates of expansion for output, employment and pre-production inventories, while new orders declined for the first time since August 2009.
New orders were stymied by reports of weaker overall demand conditions and hesitancy among clients to place orders.
The fall in new business was only fractional, but signalled a marked turnaround from the solid rise seen in April.
Data suggested that demand from both domestic and foreign clients declined during the month, as exports also fell.
In contrast to the trend seen for the service sector, manufacturers raised their output prices in May.
That said, the rate of increase was only slight.
Factory input costs meanwhile rose at the weakest rate for nearly two years, in part reflecting increased price competition among suppliers amid signs of excess capacity developing. ■