The numbers: U.S. businesses grew more slowly in August as high inflation and rising interest rates spurred consumers to curb spending, a pair of surveys showed
The S&P U.S. services index dropped to 44.1 from 47.3, based on “flash” survey. It was the fifth decline in a row and weakest reading since May 2020, shortly after the U.S. outbreak of the coronavirus.
The U.S. manufacturing index, meanwhile, slipped to 51.3 from 52.2 and registered the lowest reading in just over two years.
Readings above 50 signifies expansion; below that, contraction.
Big picture: The U.S. economy has slowed due to rising interest rates as the Federal Reserve tries to stamp out high inflation. But the economy is still growing.
The big question is, how much does the economy slow and will it slip into recession? Many economists think a recession is likely by year end or in 2023 if the Fed keeps raising rates.
Higher rates slow the economy by raising the cost of borrowing for consumers and businesses.
Market reaction: The Dow Jones Industrial Average
DJIA,
+0.13%
and S&P 500
SPX,
+0.50%
were mixed in Tuesday trades.
