Please consider the S&P Global Flash US Composite PMI™ for July 2022.

Key Findings

• Flash US PMI Composite Output Index at 47.5 (June: 52.3). 26-month low. 
• Flash US Services Business Activity Index at 47.0 (June: 52.7). 26-month low. 
• Flash US Manufacturing Output Index at 49.9 (June: 50.2). 25-month low. 
• Flash US Manufacturing PMI at 52.3 (June: 52.7). 24-month low. 

PMI Details 

US private sector firms indicated the first contraction in business activity since June 2020 in July. The downturn in output signaled a further loss of momentum across the economy of a degree not seen outside of COVID-19 lockdowns since 2009. The downturn was led by a steep drop in service sector activity, though production at manufacturers also fell marginally, down for the first time in over two years.

The rate of decline was the sharpest since the initial stages of the pandemic in May 2020, as both manufacturers and service providers reported subdued demand conditions.  

Companies noted that weak demand conditions stemmed from severe inflationary pressures and hikes in interest rates, which have exerted further strain on domestic client spending. Foreign client demand also weakened, causing new export orders to fall for a second successive month.  

Chris Williamson Comments  

• “The preliminary PMI data for July point to a worrying deterioration in the economy. Excluding pandemic lockdown months, output is falling at a rate not seen since 2009 amid the global financial crisis, with the survey data indicative of GDP falling at an annualized rate of approximately 1%. Manufacturing has stalled and the service sector’s rebound from the pandemic has gone into reverse, as the tailwind of pent-up demand has been overcome by the rising cost of living, higher interest rates and growing gloom about the economic outlook. 
• “An increased rate of order book deterioration, with backlogs of work dropping sharply in July, reflects an excess of operating capacity relative to demand growth and points to output across both manufacturing and services being cut back further in coming months unless demand revives. However, with companies’ expectations of future growth slumping to the lowest since the early days of the pandemic, any such revival is not being anticipated. Instead, firms are already reassessing their production and workforce needs, resulting in slower employment growth.  

 Williamson is Chief Business Economist at S&P Global Market  

Recession is Here 

The S&P PMI confirms what we saw yesterday with the Philly Fed manufacturing report. For discussion, please see Philly Fed Manufacturing Index Plunges Fourth Month, Expectations Gage Lowest Since 1979

In case you did not believe it before, this report should make it clear. A recession has started.

The only questions are how deep and how long. I have addressed both previously.

Minimal Rise in Unemployment

Let's investigate recession history of job losses and what's likely this time.

For discussion, please see Why I Expect a Minimal Rise in Unemployment This Recession

That's the relatively good new. The bad news is on corporate profits and the stock market.

Why Earnings and the Stock Market Will Get Crushed

Here's the case for an earnings smash accompanied by a continuation of the stock market crash: Artificial Wealth vs GDP: Why Earnings and the Stock Market Will Get Crushed

More By This Author: