Economic News Update: Key Reading Shows Economic Growth Slowing

The September Non-Manufacturing Index Thursday showed growth slowing largely due to fears over tariffs, labor resources and the general direction of the economy.

The Institute for Supply Management reported the nonmanufacturing sector grew last month for the 116th straight month but the pace slowed, especially sharply in the new orders and business activity/production categories.

The index also found imports contracting and prices increasing rapidly.

“The non-manufacturing sector pulled back after reflecting strong growth in August. The respondents are mostly concerned about tariffs, labor resources and the direction of the economy,” said Anthony Nieves, chairman of the Institute for Supply Management Non-Manufacturing Business Survey Committee.

The overall nonmanufacturing/purchasing managers indexes fell nearly four points to 52.6 from August’s 56.4 reading(50 is the dividing line between an expanding and contracting economy). The news initially sent the Dow Jones Industrial Average more than 200 points lower.

On Tuesday, ISM reported a contraction in the manufacturing sector, for the second straight month.

The numbers coupled with overseas results painted a negative picture and raised the specter of recession.

“The euro-zone economy ground to a halt in September,” Chris Williamson, an economist at IHS Markit, said, estimating growth at no more than 0.1% in the third quarter.

IHS Markit, which compiles the Purchasing Managers Index for Europe, reported the euro-area economy stagnated at the end of the third quarter, largely due to an industrial recession and unexpectedly sharp showdown in services, which dropped to the lowest point since January.

A separate U.K. report showed services in that area posting the weakest reading since the 2016 Brexit referendum. The German services index also hit its lowest level in three years.

Williamson said businesses are looking to reduce overhead even as they continue to hire workers.

There also was evidence foreign firms were moving activity out of the U.K. ahead of the Oct. 31 Brexit deadline.