The growth of the U.S. economy slowed for a second consecutive month in September, according to a pair of survey results released by S&P Global Friday.
The S&P flash composite output index, which is an early read of surveys of business executives in both the services and manufacturing sides of the economy, ticked down to 50.1 from 50.2 in August. This is the lowest reading in seven months.
That puts the composite index fractionally above the threshold of 50 that separates expansion from contraction.
“Although the overall Output Index remained above the 50.0 mark, it was only fractionally so, with a broad stagnation in total activity signalled for the second month running,” said Siân Jones, Principal Economist at S&P Global Market Intelligence.
The services sector index fell to an eight-month low of 50.2 from 50.5 in the prior month, also nearing contraction territory.
The manufacturing sector index rose to 48.9 from 47.9, signaling that conditions in the sector have continued to deteriorate. The pace of the decline slowed, however, and was only marginal as contractions in output and new orders softened.
Demand for workers has not fallen off despite the slowdown. Hiring activity increased in September and the rate of job creation rose to the fastest pace since May. Both services and manufacturing increased the pace of hiring.
“In fact, the pace of employment growth was among the most elevated seen in the past year amid some reports that staff retention was improving. Companies also noted that vacancies were filled with greater ease than had been seen in recent months,” S&P Global said.
Unfortunately, inflation remains persistent, thanks in part to rising fuel prices.
“Hikes in wage bills, borrowing costs and material prices, with many panellists mentioning greater fuel expenses, drove up cost inflation in September. The overall rate of input price inflation quickened to the sharpest since June. The faster uptick was led by manufacturing firms where the pace of increase accelerated to the steepest since April as higher oil prices pushed up chemicals, plastics and transportation costs,” S&P Global said.
“Inflationary pressures remained marked, as costs rose at a faster pace again. Higher fuel costs following recent increases in oil prices, alongside greater wage bills, pushed operating expenses up. Weak demand nonetheless placed a barrier to firms’ ability to pass on greater costs to clients, with prices charged inflation unchanged on the month,” Jones added.
The S&P Global surveys have shown the economy to be weaker than other measures this year, prompting some analysts to discount some of the pessimism in its reports.