US business hit by coronavirus

US business hit by coronavirus

Activity in the service sector fell for the first time since 2013, according to a business survey.  

US financial markets fell sharply following a report by the IHS Markit research firm which warned of a “notable worsening” in the US service sector for the first time since 2013. 

New orders received by private sector firms also dropped in number for the first time since 2009, the report stated, while manufacturing output was hit by delivery delays from China and services industries such as travel are also suffering. The latest IHS Markit/CIPS purchasing managers’ index data found that services business activity fell to 49.4, from 53.4 in January, while manufacturing output slowed to 50.8, compared to 51.9 in the first month of the year, a six-month low. The combined score was 49.6, down from 53.3 in January. Any figure below 50 signifies a contraction in business activity. 

The report follows recent trends in the bond markets, which suggest investors see the risks of holding short and long-term sovereign debt as increasingly similar, a phenomenon generally viewed as an indicator of possible recession. Executives reported that they are spending more cautiously, amid doubts concerning the upcoming presidential election and worries about a wider economic slowdown. The survey found a modest rise in business confidence, which suggests that executives are hopeful the slowdown will prove short-lived. But the rate of contraction last month was still severe, chief business economist at IHS, Chris Williamson, said in a press statement.

“With the exception of the government shutdown of 2013, US business activity contracted for the first time since the global financial crisis in February,” he noted.

The blue chip Dow Jones Industrial Average fell about 0.7% following the release of the report, while the S&P 500 dropped about 0.9% and the tech-heavy Nasdaq was more than 1% lower. Investors also turned to US government debt, considered a less risky investment, pushing prices up and yields on bonds down.

2020-02-24T18:28:26+00:00

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