📉 U.S. Business Activity Slows

📉 U.S. Business Activity Slows — But Inflation Pressures Are Tame

Factories, offices, and shops report reduced growth in recent business surveys.

In September 2025, U.S. manufacturing and services activity cooled for a second straight month, according to private business surveys.
Companies cited higher costs, supply constraints, and uncertainty about demand as contributing to slower growth.
Despite the slowdown, price pressures remained moderate — many firms said they were absorbing costs instead of passing them fully to customers.
Some inflation metrics, such as core input cost indexes, show a flattening trend, suggesting the worst of cost pressures may be behind us.

Cost Headwinds
Tariffs, energy prices, and global shipping disruptions continue to add to input expenses.
Cautious Demand
Consumers and firms appear pulling back investment in anticipation of more rate hikes or slower income growth.
Supply Chain Friction
Delays, bottlenecks, labor constraints, and logistics issues continue to drag on output.
Sticky but Controlled Inflation
While costs remain elevated in many sectors, the broad inflation environment is showing signs of moderation.

Many firms are reluctant to raise prices further — fatigue among consumers, competitive pressures, and risk of demand shock discourage aggressive mark-ups.
Wage growth, while positive, isn’t accelerating sharply enough to feed runaway inflation.
Energy and commodity prices have stabilized, lowering a major inflation input.
Central banking signals (like Fed caution) reinforce that rate easing won’t be too aggressive, helping anchor inflation expectations.

Monetary Policy
The Fed may feel freer to proceed with gradual rate cuts without overt worry about inflation flaring.
Equities & Credit
Slower growth could pressure corporate earnings, but stable inflation helps reduce downside risks in credit markets.
Consumer Sentiment
If costs stay manageable, retail and services sectors may hold up better than feared.
Emerging Markets
A stable U.S. price environment helps reduce spillover inflation or currency volatility in emerging economies.