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September 23, 2022 10:26 AM, EDT

Business Activity Gauge Improves, but Still Shows Contraction

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U.S. business activity contracted in September for a third straight month, though at a more moderate pace as a pickup in orders and a further softening of inflation allayed concerns of a more-pronounced pullback.

The S&P Global flash composite purchasing managers output index increased 4.7 points to a three-month high of 49.3, the group reported Sept. 23. Readings below 50 indicate contraction. The composite measure of orders at service providers and manufacturers rose to a four-month high.



The improvement in bookings suggests demand is holding up yet remains tenuous as customers of service providers adjust to still-elevated prices and higher interest rates.

While input-cost inflation is cooling, it remains “elevated by historical standards and, with business activity in decline, the surveys continue to paint a broad picture of an economy struggling in a stagflationary environment,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a statement.

The group’s composite gauge of input prices declined to the lowest level since January 2021. The prices charged measure also showed slower growth, but to a lesser extent than inputs as manufacturers sought to pass on high costs to customers.

The group’s index of business activity among services climbed to 49.2 in September, still indicating contraction but at the most modest pace in three months. Manufacturing expanded at a slightly faster rate than a month earlier.

Firms’ expectations for the future, meanwhile, climbed to a four-month high on hopes of a pickup in new orders and the acquisition of new customers mainly by service providers.

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