WASHINGTON Reuters -- U.S. business activity contracted for a third consecutive month in September, though the pace of decline slowed while improving global supply chains eased inflation pressures for companies.
S&P Global said on Friday it had a flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, rose to 49.3 this month from a final reading of 44.6 in August.
A reading below 50 indicates a contraction in the private sector. Business output in the third quarter was the lowest since the 2007 -- 2009 global financial crisis, as compared to the first wave of the COVID-19 epidemic in the spring of 2020.
The S&P Global survey, however, probably exaggerates the slowdown in economic activity. The Institute for Supply Management surveys have shown that the manufacturing and services industries are growing steadily this year, challenging the notion that the economy is in recession.
The income side of the growth ledger showed that the economy was growing at a moderate pace over the first and second quarters, even though gross domestic product contracted in the first and second quarters.
The economy is slowing down as the Federal ReserveFederal Reserve tightens its monetary policy to cool demand and bring inflation back to the U.S. central bank's 2% target.
The Fed delivered a 75 basis-point rate hike on Wednesday, its third straight increase of that size. There were more big increases to come this year.
The flash composite new orders index rebounded to 51.2 from a final reading of 47.4 in August.
The final reading of 70.5 in August showed an easing of supply bottlenecks, as the survey's price of inputs fell to 66.8, the lowest since January 2021, and 66.8 from a previous reading of 70.5 in August. In part because of the slowing demand, businesses are not raising prices for their products as much as they did earlier in the year.
The flash manufacturing PMI of the survey went up to 51.8 this month from 51.5 in August. The index fell to 51.1 according to economists polled by Reuters. In September, new orders grew for the first time in four months.
With input price increases slowing, average operating expenses for manufacturers rose at the slowest pace since November 2020.
The PMI for the flash services sector rose to 49.2 from 43.7 in August. As costs for some materials declined, services businesses reported a moderation in input prices.
The cost savings were passed on to their clients where possible. That could help to lower inflation in the months ahead if the trend continues. Consumer prices increased by 8.3% in August.