The Economic Expansion Slowed Sharply in August, Survey Shows

August 25, 2021

American manufacturers and service providers both reported a sharp slowdown in August, according to the forecasting firm IHS Markit’s latest survey of purchasing managers.

The firm’s index of service sector activity fell to an eight-month low in August, dropping to 55.2 from 59.9 in July. A separate index that tracks factory activity fell to 61.2 in August, down from 63.4 in July. That is the lowest level in four months.

Though both surveys remain above 50, which indicates expansion, the sudden drops suggest that the Delta variant of the Covid virus currently surging throughout the country has frightened customers and blunted the momentum of the economic recovery. An economist with IHS Markit notes that the weakening demand seems to have especially impacted customer-facing services.

The data comes on the heels of July’s disappointing retail sales, and serves as further evidence that the economic recovery likely peaked during the second quarter and growth will moderate moving forward.

Similar surveys have also seen growth slow throughout much of the world. Australia and Japan have both seen purchasing managers’ index (PMI) surveys fall to their lowest levels in more than a year. The PMI for the eurozone also fell, albeit by a lower degree. For the first time since the pandemic began, the services sector for the region grew faster than the manufacturing sector, suggesting that supply disruptions and shortages are having a bigger impact on growth than faltering consumer demand. 

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