U.S. Business Activity Rises in October; Price Pressures Ease

U.S. business activity saw an increase in October, fueled by strong demand. Companies raised prices for goods and services at the slowest rate in nearly four and a half years, indicating that the economy is starting the fourth quarter on solid ground.

S&P Global reported that its composite PMI index, which assesses both manufacturing and services, rose to 54.3 this month, up from 54.0 in September. A reading above 50 signifies growth in private sector activity.

Retail sales data suggest that economic growth accelerated in the third quarter. The Federal Reserve Bank of Atlanta estimates that the Gross Domestic Product (GDP) grew at an annualized rate of 3.4% last quarter.

This follows a growth rate of 3.0% from April to June. The government is expected to release its preliminary GDP estimate for the third quarter next Wednesday.

Chris Williamson, chief economist at S&P Global Market Intelligence, stated that “in October, business activity continued to grow at a promising and robust pace, sustaining the economic rebound seen so far this year.”

Declining Price Index

The average price index for goods and services charged by companies fell to 51.6, the lowest since May 2020, down from 54.6 in September. Consumers, concerned about inflation, have reduced purchases and opted for cheaper alternatives.

The Federal Reserve‘s Beige Book confirmed mixed consumer spending reports early in October, with some districts noting shifts toward more affordable options.

The measure of input prices paid by companies decreased to 58.1 from 58.8 last month. This moderation suggests that the rise in consumer prices observed in September was likely temporary.

Economists expect inflation to continue declining toward the Federal Reserve’s target of 2%. Last month, the central bank began its easing cycle with a half-point cut to its official interest rate.

The rate is now set between 4.75% and 5.00% amid concerns about the labor market. With downward pressure on prices, demand is rebounding. The indicator for new orders received by private companies rose to 54.2 from 52.5 in September.