WASHINGTON – United States business activity shrank in February for the first time since 2013 as the coronavirus hit supply chains and made firms hesitant to place orders, a warning sign that the outbreak is starting to dent the world’s largest economy.
The IHS Markit purchasing managers’ index measuring composite output at factories and service providers fell by 3.7 points to 49.6, the lowest level since October 2013, when the U.S. government shut down, according to preliminary figures released Friday. Readings below 50 indicate contraction.
It’s the first major piece of U.S. economic data to show a sizable hit from the coronavirus, which economists have seen as generally cutting more into Asian countries’ growth. Similar indexes in Japan and Australia also weakened, and how to cope with the disease’s economic impact is likely to be a key topic at this weekend’s meeting of Group of 20 finance chiefs.
“The deterioration in was in part linked to the coronavirus outbreak, manifesting itself in weakened demand across sectors such as travel and tourism, as well as via falling exports and supply chain disruptions,” IHS Markit economist Chris Williamson said in a statement.
The epidemic has so far killed more than 2,200 people, mostly in China, and infected more than 75,000.
The stumble in the IHS Markit survey was led by service providers, whose new orders registered the first contraction in data going back to 2009, while the manufacturing PMI fell to a six-month low of 50.8. Companies in both sectors noted reluctance among clients to place orders amid the global virus scare.
New exports contracted for a second month and hiring slowed, according to the composite index.
In the U.S., companies also expressed concern about a wider economic slowdown and the 2020 presidential election, which could result in a Democratic victor who takes policy in a different direction from Donald Trump. At the same time, firms were optimistic that the slump would be temporary, according to the report.
The U.S. reading contrasts with figures for the euro region, where a similar composite PMI edged up to 51.6, and in the U.K., where the main number was unchanged at 53.3.
Katia Dmitrieva is a reporter for Bloomberg News.
