The U.S. and European economies slowed in September as supply-chain bottlenecks and worries over the Delta variant weighed on businesses, adding to signs the global economy is experiencing a soft patch amid an uneven recovery, purchasing managers’ surveys showed.
Manufacturing and services businesses in both the U.S. and Eurozone reported slower growth in activity this month, although the pullback was more pronounced in Europe.
Forecasting firm IHS Markit said its index measuring U.S. business activity, based on surveys on purchasing managers, fell to 54.5 in September from 55.4 in August. That was the lowest level in a year, as activity at services businesses reached a 14-month low. A level above 50 points to an increase in activity, while a level below 50 indicates a contraction.
The Delta variant of Covid-19, which caused a summer surge in coronavirus cases in many parts of the U.S., weighed on activity at service-sector businesses this month, said Chris Williamson, IHS Markit’s chief business economist.
U.S. restaurants, airlines and other service-based businesses have reported a slowdown amid renewed government restrictions, such as mask mandates, and a downturn in consumer sentiment tied in part to the rise in infections. Hiring in the U.S. slowed sharply in August from earlier in the summer, with the leisure and hospitality industry showing no growth in employment.
Still, the U.S. economy has shown signs of resilience, with retail sales rebounding in August. Weekly filings for unemployment claims, a proxy for layoffs, have also remained near pandemic lows, with the four-week moving average of initial claims at a pandemic low of 335,750 last week.
Gauges of business activity in the 19-nation eurozone recorded sharply slower growth in September in both manufacturing and services, extending a slowdown that began in August after activity in July hit a 21-year high, when widening vaccination campaigns allowed public health restrictions to be rolled back and economies to rev up.
IHS Markit said its index of eurozone activity fell to a five-month low of 56.1 in September from 59 in August. The fall was steeper than predicted. Economists polled by The Wall Street Journal had expected a reading of 58.5.
Both the U.S. and Eurozone surveys pointed to some bright spots. A measure of optimism at U.S. services businesses reached a three-month high, IHS Markit said, as purchasing managers anticipated a pickup in demand and an easing of the pandemic. While overall business activity at U.S. manufacturers slowed slightly this month amid supply-chain issues, new orders and hiring increased.