US Business Activity Keeps Shrinking With Low Demand, High Inflation

Business activity in the U.S. shrank for the fourth month in a row amid continued high inflation and a decline in demand.

That’s according to a report Monday (Oct. 24) from S&P Global Market Intelligence, which showed its flash composite purchasing managers output index falling 2.2 points to 47.3.

“The US economic downturn gathered significant momentum in October, while confidence in the outlook also deteriorated sharply,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a statement issued with the report.

Williamson added that the decline was driven by a drop lurch in services activity, due to an increase in the cost of living and tighter financial circumstances.

Manufacturing output is — for now — resilient, the report said, although October saw a sharp decline in demand for goods. According to S&P, that means the current output is being kept afloat by companies filling backlogs of older orders.

“Clearly this is unsustainable absent of a revival in demand, and it’s no surprise to see firms cutting back sharply on their input buying to prepare for lower output in coming months,” Williamson said.

The report says this data shows an acceleration in the drop in business activity to the “second-fastest fall in almost two-and-a-half years.”

Read more: 40% Of US Households Are More Vulnerable to Labor Market Volatility

The findings arrive at a time when just a fraction of American consumers say their incomes have kept up with inflation, according to recent research by PYMNTS.

Our findings show that just 1 in 10 U.S. consumers have seen their incomes grow, while 48% of workers report that their incomes have stayed unchanged in the past year, and just 14% say their earnings expanded to meet or exceed inflation during that time. Women are less likely to say their wages grew on par or above inflation than men, at 11% versus 18%.

Meanwhile, the number of consumers who live paycheck to paycheck is reaching a historic high as inflation continues to exceed wages. As of last month, 63% of consumers were living paycheck to paycheck, a six percent increase from September of 2021. In addition, 65% of employed consumers were living paycheck to paycheck in September 2022 — compared to 60% in the prior year.