(Bloomberg) -- US business activity contracted in December for a sixth month, matching the lowest level since mid-2020, while inflationary pressures eased.
The S&P Global (NYSE:SPGI) flash December composite purchasing managers index slid 1.8 points to 44.6, the group reported Friday. Readings below 50 indicate shrinking activity and the latest print was among the worst in data back to 2009.
Still-high inflation paired with rapidly rising interest rates weighed on demand for goods and services in the month. A gauge of new orders at manufacturers slipped further into contraction, falling to its lowest level since May 2020. New business at service providers also shrank by the most since the early months of the Covid-19 pandemic.
“The survey data suggest that Fed rate hikes are having the desired effect on inflation, but that the economic cost is building and recession risks are consequently mounting,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a statement.
Meanwhile, businesses are continuing to report an easing in inflationary pressures amid lower commodity prices and healthier supply chains. Supplier delivery also times improved, the report showed.
The composite gauge of input prices eased for a seventh-straight month and signaled the slowest pace of price growth in over two years. A measure of prices received fell to the lowest level since October 2020, reflecting improvements at both factories and service providers.
“The upside is that weaker demand has taken pressure off supply chains,” Williamson said.
Despite a broad-based deterioration in business conditions, manufacturing firms reported a steeper decline in demand. The factory PMI slumped to the lowest level since May 2020, falling short of all estimates in a Bloomberg survey of economists. Separate reports out Thursday also pointed to a slowdown in the sector.