Kamala Harris' rising popularity in national political polls has come at the cost of worsening optimism among American businesses.
A September survey of executives revealed a sharp deterioration in forecasts for output over the next 12 months, according to S&P Global, with the survey's future output index falling to its lowest level since October 2022 and the second-lowest since the end of the pandemic.
The deterioration has been led by the services sector, a particularly worrying development as economic growth in recent months has been largely dependent on services while the manufacturing sector has been sluggish.
“Uncertainty surrounding the presidential election is dampening business confidence, demand, hiring and investment, casting a shadow over many companies' outlook for the year ahead,” Chris Williamson, chief business economist at S&P Global, said Monday.
The survey of executives known as purchasing managers, seen as a key indicator of the economy, showed that business activity lost momentum in September but remained strong, mainly thanks to strength in the services sector. Manufacturing output fell for a second straight month, the survey showed.
The preliminary S&P U.S. Services Purchasing Managers' Index (PMI) fell to 54.4 in September from 55.7 in the previous month, the lowest level in two months. A reading above 50 indicates growth.
The flash manufacturing PMI fell to 47 from 47.9, the lowest level in 15 months.
Williams said “increased political uncertainty” and weakness in manufacturing pose “significant headwinds” for the economy.
“The continued strong expansion in output implied by the September PMI is consistent with third-quarter GDP growth of a healthy 2.2% annualized rate. However, some warning lights are flashing, including continued weakness in manufacturing, increasing reliance on the services sector for growth and concerns about a slump in business confidence,” Williamson said.
Inflation also appears to be rising: A September survey showed that prices of goods and services rose at the fastest pace since March, marking the first acceleration in inflation in four months.
“Meanwhile, the survey's price readings act as a warning that the FOMC may need to tread carefully in enacting further rate cuts, despite the PMI pointing to a further deterioration in employment trends in September. Prices of both goods and services are rising at their fastest pace in six months, while service sector input costs – the main components of which are wages and salaries – are rising at their fastest pace in a year,” Williamson added.
