REUTERS/Chris Keane
- The IHS Markit purchasing managers’ index fell 3.7 points to 49.6 on Friday. The index measures composite output at factories and service providers.
- Any reading below 50 signals a contraction. Friday’s PMI marks the first contraction in US business activity since 2013.
- The deterioration in PMI “was in part linked to the coronavirus outbreak, manifesting itself in weakened demand across sectors such as travel and tourism, as well as via falling exports and supply chain disruptions,” said IHS Markit economist Chris Williamson in a statement.
- Read more on Business Insider.
Business activity in the US contracted for the first time in seven years as the spread of coronavirus weighed on manufacturing and service companies.
The IHS Markit purchasing managers’ index fell 3.7 points to 49.6 on Friday, slipping below the key 50-point mark that signals a contraction. The last time the index, which measures composite output at factories and service providers, fell below 50 was in October 2013 in the midst of a US government shutdown.
The index is the first major US economic indicator to show the impact of coronavirus, which has killed more than 2,200 people and infected more than 75,000 in just a few months. On Friday, the 30-year US Treasury yield fell to a record low of 1.89% and US stocks declined after the negative reading.
The deterioration in PMI “was in part linked to the coronavirus outbreak, manifesting itself in weakened demand across sectors such as travel and tourism, as well as via falling exports and supply chain disruptions,” IHS Markit economist Chris Williamson said in a statement.
Friday’s reading also marks the first time in four years that output from the service sector has fallen, driving the negative result. At the same time, manufacturing production also ground to an “almost halt” due to a near-stalling of orders, Williamson said. Total new orders fell for the first time in a decade, and GDP growth slowed to 0.6% in February from slightly more than 2% in January, according to the report.
Still, the February survey also showed a “notable upturn” in business sentiment about the year ahead. This reflects “widespread optimism that the current slowdown will prove short-lived,” Williamson said.
Companies also showed increased hesitation around spending due to worries about a potential slowdown in the US economy and uncertainty about the outcome of the 2020 presidential election, according to the report.
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