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U.S. Business Activity Contracts For The First Time In Two Years.

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U.S. business activity fell to the lowest level during July in more than 2 years. Rapid declines in the service industry outweighed an ongoing modest increase in manufacturing, presenting a grim outlook for an economy that is weakened by the high rate of inflation, rising interest rates, and declining consumer confidence.

S&P Global on Friday said the preliminary – or “flash” – U.S. Composite PMI Output Index dropped more than forecast to 47.5 this month, down from the final figure at 52.3 during June. Suppose a reading is below 50, meaning that business activity was declining. In that case, this event could trigger an ongoing debate about how it is true that the U.S. economy is back in or close to recession following a sharp rebound from the recession in early 2020 before the onset of the COVID-19 epidemic.

The decline in July marked the fourth drop in a row. It was driven mainly by the pronounced weakening in the service industry index. It dropped to its lowest level since May 2020, at 47.0 from 52.7 one month earlier. This was sufficient to offset relative steady growth in manufacturing and the factory activity index dropping from 52.3 to 52.7, which indicated that the sector is still growing but at the lowest rate since July 2020.

Economic experts surveyed by Reuters reported a median estimate for the index of services at 52.6, and the manufacturing index was estimated to come at 52.0.

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“The preliminary PMI data for July point to a worrying deterioration in the economy,” S&P Global Chief Business Economist Chris Williamson said in a statement. “Excluding pandemic lockdown months, the output is falling at a rate not seen since 2009 amid the global financial crisis.”

S&P Global’s measures of the number of new order intakes in the production industry, exceptional service business, and expectations for the future in both dropped to levels that were not seen since the beginning of the year of the pandemic.

The latest report is in a series number of economic data that has “surprised” to the downside in comparison to expectations of economists and sparked fears from Wall Street to Main Street about whether the economy is slowing down. This month, its U.S. Economic Surprise Index recorded its lowest level since May 2020 and is still negative in July.

According to the S&P Global data point to U.S. gross domestic product declining at a roughly one percent annualized rate, Williamson declared. The economy slowed at a 1.6 percentage rate during the first quarter of the year, mainly due to the management of inventory in business problems. The government is scheduled to release its first output report in the second quarter. According to some estimates, it could result in a third straight contraction.

The report also provided the picture of a softer job market and has surpassed expectations of an eminent slowdown, and unemployment remains near the half-century mark. S&P Global said its manufacturing index of employment fell to the lowest since July 2020. Meanwhile, work in services saw the weakest increase since February.

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On Thursday, The Labor Department reported that new claims for unemployment assistance rose to their highest level since November last week. It also said that just a week ago, the number of people receiving unemployment aid had increased to the highest since April. But both numbers are under the historical norms.’

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