US private sector activity contracted for a fifth straight month in June, but the pace of decline eased as the world’s largest economy began to lift coronavirus lockdowns, according to a flash PMI survey.
IHS Markit’s flash composite PMI reading, which which tracks the manufacturing and services sectors, rose to a reading of 46.8 last month from 37 in May.
A reading below 50 indicates contraction in private sector output. The US economy slipped into recession in February.
The improvement this month came as businesses began to reopen after shuttering in mid-March to control the spread of Covid-19.
Despite the easing of lockdown, layoffs have continued into June, with businesses freezing on hiring to deal with weak demand and to cut costs.
Chris Williamson, IHS’s chief business economist, said the data showed “the US economic downturn abating markedly in June.”
“The second quarter started with an alarming rate of collapse but output and jobs are now falling at far more modest rates in both the manufacturing and service sectors. The improvement will fuel hopes that the economy can return to growth in the third quarter,” he said.
IHS Markit’s PMI reading for the services sector rose to 46.7 in June from 37.5 the month before.
Economists polled by Reuters had forecast a reading of 46.0 in June for the sector, which accounts for roughly two-thirds of the US economy.
In the manufacturing sector, the contraction in activity slowed this month, with the flash manufacturing PMI increasing to 49.6 from a reading of 39.8 in May, beating economists’ forecasts of 47.8.
A measure of new orders received by factories increased to a reading of 49.5 in June from 34.6 in May.
Businesses reported increases in both input and output prices for the first time since February.
IHS Markit said that, “firms stated that higher input costs from suppliers due to Covid-19 related supply chain issues were partially passed on to clients, with some mentioning that demand conditions were such that discounting was no longer required.”
Williamson warned that although it may be brief, the coronavirus-induced economic downturn “has been fiercer than anything seen previously, leaving a deep scar which will take a long time to heal”.
“Any return to growth will be prone to losing momentum due to persistent weak demand for many goods and services, linked in turn to ongoing social distancing, high unemployment and uncertainty about the outlook,” he added.
“The recovery could also be derailed by new waves of virus infections.”