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21 May 2020

Rate of contraction of U.S. private sector business activity slows in May - IHS Markit's survey

Preliminary data released by IHS Markit on Thursday pointed to a slightly slower rate of contraction of the U.S. business activity in May, as the economy began to reopen.

According to the report, the Markit flash manufacturing purchasing manager's index (PMI) came in at 39.8 in May, up from 36.1 in April, but nonetheless pointing to a further substantial deterioration in operating conditions midway through the second quarter. Economists had expected the reading to increase to 38. A reading above 50 signals an expansion in activity, while a reading below this level signals a contraction. According to the report, significant contractions in production and new orders drove the deterioration, as businesses slowly returned to work amid challenging domestic and foreign demand conditions. The rates of reduction were among the most marked since the depths of the financial crisis.

Meanwhile, the Markit flash services purchasing manager's index (PMI) rose to 36.9 in May from the record low of 26.7 in the prior month but nonetheless signaling one of the most severe contractions in service sector activity on record. Economists had expected the reading to rise to 30.0. According to the report, the contraction in the headline index was driven by further weakness in domestic and foreign client demand.

Overall, IHS Markit Flash U.S. Composite PMI Output Index came in at 36.4 in May, up from 27.0 in April, but nonetheless indicating the second-sharpest decline in business activity since the series began in late-2009.

Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at HIS Markit, noted: “Encouragement comes from the survey indicating that the rate of economic collapse seems to have peaked in April. In the absence of a second wave of COVID-19 infections, the decline should moderate further in coming months as measures taken to contain the coronavirus are steadily lifted.”

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

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