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Economic Report: Economy slowing sharply due to high inflation and rising interest rates, S&P finds

The numbers: U.S. businesses suffered a sharp slowdown in growth in June, a pair of surveys showed, as high inflation forced customers to cut back on orders and rising interest rates induced worries about a recession.

The S&P U.S. services index fell to a five-month low of 51.6 in June from 53.4 in the prior month, based on flash or preliminary survey.

The U.S. manufacturing index, meanwhile, slid to a nearly two-year low of 52.4 from 57 in the prior month.

Any number over 50 signifies expansion and readings below that mark point to economic contraction.

Big picture: Demand is slowing as customers balk at higher prices and talk of recession grows. While labor and supply shortages persist, high inflation and rising interest rates might be overtaking them as the biggest worry of business.

Looking ahead: “Business confidence is now at a level which would typically herald an economic downturn, adding to the risk of recession,” said Chris Williamson, chief business economist at S&P Global. The report used to be known as IHS Markit.

Market reaction: The Dow Jones Industrial Average
DJIA,
+0.30%

and S&P 500
SPX,
+0.42%

rose in Thursday trades.

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