The numbers: An ISM barometer of business conditions at companies such as retailers and restaurants fell to 54.4% in October and touched the lowest level since the U.S. lockdowns in 2020, pointing to a slowing U.S. economy.
While numbers over 50% are viewed as positive, the index has fallen to two-and-a-half year low. The last time the barometer was even lower was in May 2020.
Economists polled by The Wall Street Journal had expected the index to drop to 55.5%. The survey is produced by the institute for Supply Management.
The snapshot of the economy painted by the service sector index mirrors a similar ISM survey of manufacturers that showed deteriorating business conditions.
“As we prepare for a recession, our stakeholders, clients and vendors are all tightening their belts and reducing new spend,” one executive at a tech company told the ISM.
The closely followed ISM reports are the first major indicators of each month and offer clues on how well the economy is performing.
Key details:
- The new orders index fell 4.1 points to 56.5%.
- The production gauge slid 3.4 points to 55.7%
- The employment barometer dropped 3.9 points to 49.1% and turned negative.
- The prices-paid index, a measure of inflation, rose 2 points to 70.7% to break a string of five straight declines.
Big picture: The economy is still growing — but so are worries about recession.
Federal Reserve Chairman Jerome Powell on Wednesday signaled the central bank is going to raise interest rates more than previously expected to try to squelch high inflation. Higher borrowing costs slow the economy.
Rates have risen so rapidly, many economists say, that a downturn is likely in 2023.
Market reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
fell in Thursday trades.
