U.S. Activity Index Falls to 57.6 in October as Price Pressures Widen
Key Facts
The S&P Global U.S. Composite PMI fell to 57.6 in October from 58.4 in September, but remained in territory indicating strong growth, according to the preliminary reading released by S&P Global. The firm said the increase in activity was the second-fastest since March 2022. The reading reflects slower momentum than the previous month, not a contraction in activity. Meanwhile, the pace of growth in new orders rose to a five-and-a-half-year high, while export sales improved. This coincided with faster hiring and a return of price pressures to levels not seen since 2022.
Growth in both manufacturing and services slowed, but expansion rates in both remained among the highest of the past five years, according to the survey data. Orders diverged between the sectors: the rate of increase weakened in manufacturing, while growth in new business improved in services. Services sales recorded their strongest increase since March 2022, according to S&P Global Market Intelligence. Across the economy, growth in new orders rose above its elevated September level to reach a five-and-a-half-year high. Export sales also gained momentum, posting their strongest increase since May 2022.
The survey data indicated that the annualized pace of gross domestic product growth was 5.0% in October, compared with a 4.0% pace indicated by the survey for the third quarter. These are estimates based on the activity indicators tracked by the survey, while the official preliminary estimate for the third quarter is due later this month. In the labor market, employment rose in October at the fastest pace since June 2022, with jobs increasing in services and manufacturing. Manufacturing job growth was the fastest since March 2012. These indicators add to a picture of strong activity, despite the composite index’s decline from its September reading.
In contrast, the selling price index for goods and services rose at the fastest pace since August 2022, with price pressures broad-based. Companies said higher costs for oil and its derivatives, energy, fuel and shipping contributed to the pressure, along with raw materials including steel, aluminum and copper. Input costs also rose at the fastest pace since November 2022, excluding the increase recorded in September. The chief economist at S&P Global Market Intelligence said, "The renewed rise in oil prices is reverberating across a wide range of goods and services." He added that supply-chain bottlenecks had intensified, while those bottlenecks and a buildup of backlogged orders were making it easier for companies to pass higher costs on to customers.
Unfinished business accumulated by the most since May 2022, while supplier delivery times lengthened to the greatest extent since 2022, amid material shortages and shipping delays, according to the survey. This suggests strong demand coincided with supply constraints as input costs and selling prices rose. Separately, the U.S. Labor Department said seasonally adjusted initial claims for unemployment benefits totaled 194,000 in the week ended October 17, down 6,000 from the previous week’s revised level. The four-week average of claims was 197,750. These data put the survey’s strong employment indicators in the context of weekly figures showing a decline in claims, without establishing a comparison between the figure and market expectations.
The Federal Open Market Committee meeting is scheduled for October 27 and 28, with the press conference to be held on October 28, according to the Federal Reserve calendar. S&P Global Market Intelligence said its policy index, based on output, employment and cost components, edged down in October after reaching its highest level since June 2022 in September, and remained in territory consistent with a rate increase. This is an assessment of the index, not an announcement of the committee’s decision. After the meeting, the U.S. Bureau of Economic Analysis has scheduled the release of its advance estimate of third-quarter GDP for October 29 at 8:30 a.m. Investors are watching both dates amid concurrent signals of continued growth and rising price pressures.