U.S. Economic Growth Moderated in July -- IHS Markit
July 23 2021 - 10:38AM
Dow Jones News
By Xavier Fontdegloria
Private sector business activity in the U.S. lost some momentum
in July as the services sector cooled amid labor and supply
shortages.
The flash reading for the U.S. Composite Output Index fell to
59.7 in July from 63.7 in June, preliminary data from IHS Markit
showed Friday.
The indicator suggests that the U.S. economy continued to expand
solidly in the month, albeit the rate of output growth was the
slowest since March.
The indicator is based on data from the firm's PMI surveys for
manufacturing and service sectors. Growth in the service sector
slowed but accelerated in manufacturing, chiming with many
economists' views that the economic recovery from the pandemic has
likely topped in the second quarter.
"While the second quarter may ... represent a peaking in the
pace of economic growth according to the PMI, the third quarter is
still looking encouragingly strong," said Chris Williamson, chief
business economist at IHS Markit.
Some moderation of service sector expansion was expected after
the initial reopening of the economy, he said.
IHS Markit's flash U.S. Services Business Activity Index
decreased to 59.8 in July from 64.6 in June, below the 64.2
expected reading from economists polled by The Wall Street Journal
and a five-month low.
Service providers noted customer hesitancy amid significant
increases in selling prices. Firms also linked lower growth to
labor shortages and difficulties acquiring stock, the report
said.
The IHS Markit Flash Manufacturing PMI rose to 63.1 in July from
62.1 in June, reaching a new record-high. Economists expected the
indicator to fall slightly to 61.8.
Supporting overall growth was a quicker rise in new orders, as
new and existing customers ramped up their spending. Production
rose at a slightly quicker pace despite further reports of material
shortages, IHS Markit said.
Supply-chain problems and cost pressures remained a constrain
for both manufacturers and services providers, pushing prices
higher. However, there were signs of inflationary pressures
peaking, with both input cost and selling price gauges falling for
a second month in July, Mr. Williamson said.
Price pressures, supply constraints and the Delta variant remain
major sources of uncertainty among businesses, with business
optimism about the year ahead falling to the lowest seen so far
this year, the report said.
"The concern is this drop in confidence could feed through to
reduced spending, investment and hiring, adding to the possibility
that growth could slow further in coming months," Mr. Williamson
said.
Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com
(END) Dow Jones Newswires
July 23, 2021 10:25 ET (14:25 GMT)
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