LIVE MARKETS-Two-fer Tuesday: Business activity loses steam, current account boomerangs on tariffs

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TWO-FER TUESDAY: BUSINESS ACTIVITY LOSES STEAM, CURRENT ACCOUNT BOOMERANGS ON TARIFFS

Tuesday brought with it news of cooling business activity and a sharp bounce-back in imports in the wake of President Trump's market-shaking tariff brouhaha.

While activity at U.S. businesses continues to increase in September, the rate of growth has lost some steam this month.

S&P Global's advance "Flash" September purchasing managers' indexes (PMI) showed the manufacturing side USMPMP=ECI shedding 1.0 point to an even 52.0, nailing the consensus landing. The services sector USMPSP=ECI also lost some momentum, dipping 0.6 points to 53.9, a mere rounding error below analysts' 54.0 estimate.

Taken together, the composite measure USPMCF=ECI slipped a full point, from 54.6 to 53.6. Even so, that's still well above 50, the PMI dividing line between contraction and expansion.

After calling the data "robust," and saying that the report indicates the July-September period "the best quarter so far this year for US businesses," Chris Williamson, S&P Global's chief business economist adds that growth has "slowed from its recent peak back in July, and September saw companies also pull back on their hiring."

"Softening demand conditions are also becoming more widely reported, curbing pricing power," Williamson continues. "Although tariffs were again cited as a driver of higher input costs across both manufacturing and services, the number of companies able to hike selling prices to pass these costs on to customers has fallen, hinting at squeezed margins but boding well for inflation to moderate."

In more ancient news, the second-quarter current account deficit USCURA=ECI, which accounts for trade, international investment and other transfers of capital, contracted by a whopping 42.9% to land at $251.2 billion, according to the Commerce Department.

That's 2.1% narrower than analysts expected and represents a pull-back from the first quarter's record $439.8 billion, which was the result of businesses front-loading imports to head off the expected Trump tariffs.

Tracking goods, services and income receipts, a 9.5% drop in imports handily overshadowed a 2.3% bump in exports.

(Stephen Culp)

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