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Business activity slowed worldwide last month, according to surveys of purchasing managers.
In the U.S., the composite purchasing managers index (PMI) encompassing both goods and services, sank to 47.5 in July, compared with 52.3 in June.
Ratings below 50 indicate economic contraction.
“The downturn signaled a further loss of momentum across the economy not seen outside of COVID lockdowns since 2019,” research service S&P Global wrote in a statement.
Business in the U.S. service sector fell dramatically, The Wall Street Journal said, with the PMI for services dropping the most in one month since May 2020.
Rising prices of food, fuel, and other necessities are forcing consumers to dedicate a larger share of incomes to essentials and cut discretionary spending on things like dining out and yoga classes.
The Eurozone’s composite PMI for July also crossed below 50, falling from 52.0 in June to 49.4 last month, S&P Global reported, with Germany’s economy suffering the steepest drop. (See “Germany Stalls, Other EU Economies Claim Growth in July” in this issue.)
Japan’s factory productivity declined for the first time in five months, with new factory orders dropping at their steepest since November 2020.
TRENDPOST: While analysts warn of stagflation, the world’s economy has entered into a period of rising prices and falling economic output, the definition of Dragflation, our Top 2022 Trend.
TREND FORECAST: If current patterns continue, Dragflation will persist until a severe recession crashes the global economy.
Central banks’ tepid interest-rate hikes are having little effect, as we note in “ECB Raises Interest Rate By a Half-Point” in this issue.
More likely, high prices will force consumers to simply stop buying a wide range of discretionary goods and services, leading into a recession that will bring prices down across a wider portion of the economy and causing some sectors of inflation to decline and/or pause.
However, there are always the wild cards, be they made by humans or nature, and the wildest of cards currently being dealt are WWIII.