U.S. Business Activity Accelerates in October as Outlook Weakens
U.S. business activity gained momentum in October, driven mainly by growth in the services sector, according to data from S&P Global. However, concerns over trade policy, weak exports, and slowing confidence limited job gains and left businesses holding excess inventory.
The S&P Global Flash U.S. Composite PMI Output Index, which tracks both manufacturing and services, rose to 54.8 in October from 53.9 in September, signaling steady private-sector expansion. A reading above 50 indicates growth.
Services Drive Growth as Manufacturing Holds Steady
The services industry accounted for most of the improvement, while manufacturing output maintained a consistent pace. The data suggests the U.S. economy began the fourth quarter on a relatively solid footing.
However, analysts warned that the ongoing U.S. government shutdown and the funding dispute in Congress have created a data blackout, making it difficult to accurately assess the economy’s overall health.
Confidence Drops as Trade Tensions Bite
Despite stronger output, business confidence weakened to one of the lowest levels in three years, said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence. He cited tariffs and trade uncertainty under the Trump administration’s protectionist policies as major concerns.
Export demand also fell sharply. The survey’s new export orders index dropped to a six-month low of 47.8, down from 49.7 in September, highlighting reduced foreign demand for U.S. goods.
Rising Inventories and Price Pressures
Businesses reported rising inventory levels and slower selling price growth, even as input costs continued to climb due to tariffs. The index measuring prices charged eased to 55.2 from 56.5, while the prices paid index edged higher to 60.8 from 60.6.
Economists noted that while consumer prices have risen moderately because of tariffs, inflation has remained under control as companies absorb higher import costs rather than pass them fully to consumers.
Labor Market Remains Soft
Employment in the private sector improved slightly, with the index rising to 51.4 from 50.6. All job gains came from services, while factory hiring slowed. S&P Global said that companies face labor shortages and are hesitant to expand payrolls amid uncertain demand.
Economists expect the Federal Reserve to cut interest rates again next week to support the labor market and sustain economic growth amid weaker sentiment and global trade pressures.
