US Service Activity Decline Accelerates while Manufacturing Output Rises in October

The latest S&P Global flash PMI data shows private sector firms in the US recorded a further downturn
in output at the start of the fourth quarter. The headline Flash US PMI Composite Output Index
was 47.3 in October, down from 49.5 in September. With the exception of the initial pandemic period, the rate of decrease was the second-fastest since 2009. The fall in business activity was stronger than in September, as service providers signaled a quicker decline. Manufacturers, on the other hand, saw output rise for the second month running, albeit only marginally

US manufacturing Workers
ISM Manufacturing June 2022


  • Flash US PMI Composite Output Index at 47.3 (September: 49.5). 2-month low.
  • Flash US Services Business Activity Index at 46.6 (September: 49.3). 2-month low.
  • Flash US Manufacturing Output Index at 50.7 (September: 50.6). 5-month high.
  • Flash US Manufacturing PMI at 49.9 (September: 52.0). 28-month low.
  • Data collected 06-21 October

Service Sector Woes

Second-fastest fall in business activity in almost two-and-a-half years, due to weak client demand and the impact of inflation and higher interest rates. New business fell for the second time in the last three months, with new export orders declining sharply due to challenging economic conditions in key export markets.


The rate of input price inflation at service providers quickened in October. Although the second slowest since the start of 2021, the latest uptick reversed the recent trend of easing price pressures. Companies partially passed on higher cost burdens to their customers, as the pace of charge inflation picked up slightly.


A return to decline in the level of outstanding business led to service sector firms reducing their workforce numbers during October. Companies noted the non-replacement of voluntary leavers, alongside some reports of layoffs. The decrease in employment was the first since June 2020.

Business Confidence

Meanwhile, service sector business confidence fell to the weakest level since September 2020, as higher operating costs and client hesitancy weighed on optimism.

A number above 50.0% is indicative of expansion. 

United States Services PMI

Manufacturing Output Improving

New orders shrank, signaling a renewed decline in demand with manufacturers highlighting the impact of high inflation and stock building from earlier in the year. The rally for the dollar also pressured export demand to decline at the quickest pace since May 2020.

Output across the manufacturing sector increased for the second month running in October, as firms noted easing supply chain pressures and the delivery of some key inputs.

The rise in production was slight, but the quickest for five months. Vendor performance continued to
deteriorate, but to the smallest extent since July 2020 as firms noted less marked extensions to input delivery times.

United States Manufacturing PMI

Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at S&P Global Market
Intelligence said:

“The US economic downturn gathered significant momentum in October, while confidence in the outlook
also deteriorated sharply. The decline was led by a downward lurch in services activity, fueled by the rising cost of living and tightening financial conditions. While output in manufacturing remains more resilient for now, October saw a steep drop in demand for goods, meaning current output is only being maintained by firms eating into backlogs of previously placed orders. Clearly this is unsustainable absent of a revival in demand, and it’s no surprise to see firms cutting back sharply on their input buying to prepare for lower output in coming months.

“One upside of this drop in input buying has been a further alleviation of supply constraints, which alongside the stronger dollar have helped cool price pressures in the manufacturing sector.

“Although price pressures picked up slightly in the service sector due to high food, energy and staff costs, as well as rising borrowing costs, increased competitive forces meant average prices charged for services grew at only a fractionally faster rate. Combined with the easing of price pressures in the goods-producing sector, this adds to evidence that consumer price inflation should cool in coming months.

“The surveys therefore present a picture of the economy at increased risk of contracting in the fourth quarter at the same time that inflationary pressures remain stubbornly high. However, there are clearly signs that weakening demand is helping to moderate the overall rate of inflation, which should continue to fall in the coming months, especially if interest rates continue to rise.

Source: S&P Global

From The TradersCommunity News Desk