US economic recovery weakens with election and pandemic presenting new risks, IHS Markit says
Markit's US Composite Output Index sank to 54.4 in September from 54.6, signaling the nation's economic recovery continued into the fall, albeit at a slowing pace.
- The research firm's services purchasing managers' index weakened to 54.6 from 55, according to a Wednesday report. Its manufacturing gauge edged higher to 53.5 from 53.1.
- Still-heightened COVID infection rates and uncertainty around the US presidential election are the biggest factors skewing economic risks to the downside, Chris Williamson, chief business economist at
IHS Markit, said in a statement.
- "The question now turns to whether the economy's strong performance can be sustained into the fourth quarter" after outsized third-quarter gains, he added.
The US service and manufacturing industries recovered slower in September from the previous month as the third-quarter bump gave way to new obstacles, IHS Markit said Wednesday.
The research firm's Composite Output Index fell to 54.4 from 54.6 this month, its lowest point in two months, according to a Wednesday morning report. IHS's purchasing managers' index for US services businesses declined to 54.6 from 55. The PMI for US manufacturing firms edged higher to 53.5 from 53.1.
Readings above 50 indicate growth, while those below the threshold signal industry contraction. IHS's gauges posted sharp declines and subsequent rebounds earlier in the pandemic as lockdowns halted activity.
While September's services reading points to continued growth, its retreat from August levels suggests the pace of the economic bounce-back is weakening. Services make up roughly 70% of the US economy.
Revived COVID-19 fears and the upcoming US presidential election are the two biggest roadblocks through the end of the year, Chris Williamson, chief business economist at IHS Markit, said in a statement. Infection rates remain at elevated levels as reopenings steadily continue, threatening another rebound in case counts and potential lockdowns. Uncertainties surrounding the election's outcome are also weighing on business optimism.
"The question now turns to whether the economy's strong performance can be sustained into the fourth quarter," Williamson said, adding risks "seem tilted to the downside."
Businesses remained confident toward the economy's path over the next year, but the overall level of optimism fell to a four-month low, according to IHS. New business growth for US services accelerated to an 18-month high. Employment in the industry increased, though at a slower pace than in August.
IHS's manufacturing gauge was mostly lifted by a faster increase in production and improved new orders. The industry's expansion in new export orders slowed to marginal growth. Employment at manufacturers also grew at a slower pace compared to last month.
Overall, the PMIs point to the third quarter's outsized gains shifting to mixed results heading into the fall, Daniel Silver, economic researcher at JPMorgan, said in a note. The move "looks broadly consistent with many
Read more: Anthony Scaramucci told us his contrarian views on the risks investors face after the elections regardless of who wins — and shared how his $7.5 billion SkyBridge Capital is navigating the market's volatility
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