US private sector shrinks amid global fears and presidential race uncertainty

The US private sector suffered a shock contraction in February as businesses cut back on spending in the face of stumbling global growth and rising uncertainty around this year’s presidential election, writes Tom Rees.

The composite purchasing managers’ index (PMI) pointed to the first contraction for the private sector since 2013, plunging to a score of 49.6 in February from 53.3, according to data giant IHS Markit. Any reading above 50 signals growth.

New orders fell for the first time in a decade after companies expressed “worries about a wider economic slowdown and uncertainty ahead of the presidential election”, it said.

Paul Ashworth, economist at Capital Economics, warned the weak PMIS highlighted the risk of a “wobble” in the first quarter but predicted that growth will “pick up over the course of this year”. The US services sector unexpectedly contracted while factories also suffered a setback.

The manufacturing PMI dropped to a six-month low.