Investing.com - U.S. business activity came close to stalling in February as a fresh decline in services output offset faster -- albeit temporary -- growth in manufacturing, according to a preliminary survey on Friday.
S&P Global (NYSE:SPGI)’s flash composite purchasing managers’ index for February, which tracks both services and manufacturing, fell to 50.4 from 52.7 in January. A reading above 50 denotes expansion.
It was the lowest level of the index for 17 months, with business inflows into the services sector nearing stagnation.
"Service providers commonly linked the downturn in activity and worsening new orders growth to political uncertainty, notably in relation to federal spending cuts and potential policy impacts on economic growth and inflation outlooks," S&P Global said.
The boost in factory activity was in part linked to the "front-running" of U.S. President Donald Trump’s tariffs as companies raced to lock in orders before the levies come into effect, S&P Global said.
Meanwhile, input cost pressures spiked, particularly in manufacturing, where suppliers were passing on price hikes related to Trump tariffs.
Expectations among businesses for the year ahead also slumped due to rising worries and uncertainty around the policies of the new Trump administration, the survey showed.
Trump has threatened to slap levies on both friends and foes alike, although analysts have noted that his actions may be used more as tools to re-negotiate trade deals with foreign countries.
So far, Trump has placed a 10% tariff on China, delayed separate duties on Canada and Mexico, and targeted an initiative to roll out surcharges on steel and aluminum from March 12. He has also asked his staff to come up with proposals for broad-based reciprocal tariffs which could come into effect later this year.
Recent data have indicated that fears around the plans are beginning to weigh on American consumers, with a final February measure of sentiment from the University of Michigan dropping to 64.7 on Friday, down from an initial reading of 67.8. Inflation lingers well above the Federal Reserve’s stated 2% target level as well.
Fed officials, who pushed pause on a policy easing cycle in January, have signaled that they will take a wait-and-see approach to future potential interest rate cuts, partly due to the murky outlook around the possible impact of Trump’s policy actions.