U.S. Activity Slows to 57.6 in October as Prices Post Fastest Rise Since 2022
Key Facts
The preliminary S&P Global U.S. composite output index fell to 57.6 points in October from 58.4 points in September, but posted its second-fastest increase in activity since March 2022, according to data reported by Dow Jones. A reading above 50 points signals activity improved from the previous month, while October's reading means the pace of expansion eased from the prior month but remained strong. Chris Williamson, chief business economist at S&P Global, said October's data indicate the U.S. economy "continues to thrive at the start of the fourth quarter." The index combines output at private-sector manufacturing and services companies, offering an early reading of business activity at the start of the quarter. The reading came as price pressures facing companies increased, putting continued activity growth alongside mounting cost concerns.
The survey attributed growth in manufacturing and services to resilient domestic demand, accompanied by renewed signs of export growth. The result offers an indication of improved demand observed by companies, but does not represent a direct measure of consumer spending. Meanwhile, the University of Michigan's final consumer sentiment index fell to 48.0 points in October from 48.1 points in September. October's reading was the second-lowest on record, after the record low of 44.8 points in May, according to data reported by Reuters. Joanne Hsu, director of the university's Surveys of Consumers, said purchasing power "continues to dominate consumers' views of the economy," contrasting the demand signals observed in the business survey with weak household sentiment.
On prices, the overall increase in prices for goods and services was the largest since August 2022, the survey showed. Renewed gains in oil prices kept cost pressures at the forefront of companies' concerns, according to S&P Global data reported by Dow Jones. Williamson said supply-chain bottlenecks intensified alongside growth in backlogs of orders. That, he added, "makes it easier for companies to pass higher costs on to customers." The development comes as activity continues to expand, with survey comments indicating that companies faced resilient demand while production costs and passing them on to customers became more prominent.
Consumer data reflect continued pressure on purchasing power weighing on sentiment: Hsu said confidence was 10% below its level a year ago and 15% below its level in February, before the Iran conflict. The comparison puts the current reading in the context of a decline over the year, with a further drop from February's level. In the oil market, the U.S. Energy Information Administration forecast in a report released on October 19 that Brent crude would average $105 per barrel in the fourth quarter. That is $14 per barrel above the previous month's forecast. The agency's estimate comes against the backdrop of concerns flagged by the business survey about renewed gains in oil prices and cost pressures.
Markets are watching the Federal Open Market Committee meeting on October 27 and 28, according to the Federal Reserve's calendar, with a news conference scheduled after the meeting. On October 29 at 8:30 a.m., the U.S. Bureau of Economic Analysis will release its advance estimate of third-quarter gross domestic product, along with its September personal income and outlays report. The second estimate of third-quarter GDP and corporate profits, together with the October income and outlays report, is scheduled for November 25 at 8:30 a.m. Detailed October purchasing managers' index data will be released in stages, with manufacturing on November 2, followed by services and the composite index on November 4, according to S&P Global. These dates will add subsequent readings on activity and spending to the preliminary survey data released in October.