U.S. Business Activity Expansion Pace Steadies in September -- IHS Markit

By Xavier Fontdegloria

The expansion pace of overall business activity in the U.S. private sector was largely unchanged in September, with services sector slightly easing and manufacturing sector remaining strong, preliminary data from IHS Markit showed Wednesday.

The flash reading for the U.S. Composite Output Index stood at 54.4 in September, fractionally down from the 54.6 registered in August. The reading fell for the first time in five months, suggesting the pace of the economic recovery steadied after strong rebounds due to the reopening of the economy.

The indicator is based on data from the firm's PMI surveys for manufacturing and services sectors. An index reading above 50 indicates expansion, while below 50 it signals contraction.

U.S. companies signaled a further solid rise in business activity during September, albeit one that was slightly weaker than seen in August, IHS Markit said. Manufacturers and service providers alike noted strong expansions in output, with goods producers registering a faster rise in production.

The survey data add to signs that the economy will have enjoyed a solid rebound in the third quarter, said Chris Williamson, chief business economist at IHS Markit. "U.S. businesses reported a solid end to the third quarter, with demand growing at a steepening rate to fuel a further recovery of output and employment," he said.

In September, both sectors remained in expansion territory, but data pointed to divergent fortunes between services and manufacturing: while the former slipped, the latter strengthened.

IHS Markit's flash U.S. Services Business Activity Index was 54.6 in September, down from 55.0 in August. Economists polled by Dow Jones expected the indicator to come in at 54.6.

The rate of expansion was the second-fastest since March 2019 and solid overall, the report said.

As for the manufacturing sector, IHS Markit PMI stood at 53.5 in September, compared with August's 53.1 level and reached a 20-month high. Economists expected the U.S. Manufacturing PMI flash reading to be at 53.8.

Private sector firms remained optimistic regarding the outlook for output over the coming 12 months at the end of the third quarter, but the overall degree of confidence dropped to a four-month low. Election uncertainty and the ongoing pandemic reportedly weighed on sentiment, IHS Markit said.

"The question now turns to whether the economy's strong performance can be sustained into the fourth quarter," Mr. Williamson said, noting that risks seem tilted to the downside for the coming months due to the increasing concerns about Covid-19 infection rates and uncertainty regarding the presidential election.

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