U.S. business activity growth eases to three-year low in May

Preliminary data released by IHS Markit on Thursday indicated that the U.S. private sector growth in May expanded at the weakest pace since May 2016.

According to the report, the Markit flash manufacturing purchasing manager's index (PMI) stood at 50.6 in May down from 52.6 in April. The latest reading pointed to the weakest rate of expansion in the manufacturing sector since September 2009.

Economists had expected the reading to edge down to at 52.5. 

A reading above 50 signals an expansion in activity, while a reading below this level signals a contraction. 

According to the report, the paces of expansion for output, employment and pre-production inventories slowed, while new orders dropped for the first time since August 2009.

Meanwhile, the Markit flash services purchasing manager's index (PMI) decreased to 50.9 this month, down from 53.0 in the prior month. The reading indicated the slowest increase is the services sector since March 2016, as the rate of growth of the new orders eased for the third successive month amid softer demand conditions and intense competition.

Economists had expected the reading to increase to 53.2. 

Overall, IHS Markit Flash U.S. Composite PMI Output Index came in at 50.9 in May, down from 53.0 in the previous month, indicating the slowest expansion in overall business activity since May 2016. 

Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit noted, “Growth of business activity slowed sharply in May as trade war worries and increased uncertainty dealt a further blow to order book growth and business confidence. A decline in the headline ‘flash’ PMI to its lowest for three years pushes the survey data down to a level historically consistent with GDP growing at an annualized rate of just 1.2% in May. Worse may be to come, as inflows of new business showed the smallest rise seen this side of the global financial crisis. Business confidence has meanwhile slumped to its lowest since at least 2012, causing firms to tighten their belts, notably in respect to hiring. Jobs growth in May was the weakest seen for over two years.”