US businesses less optimistic in June due to greater uncertainty around Covid-19

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US private-sector firms were less optimistic in June as companies expressed greater uncertainty surrounding Covid-19 and the subsequent impact on the private sector, according to the IHS Markit US Business Outlook released today. Employment expectations dropped to the lowest since February 2017.

Private sector firms continued to forecast a rise in employment over the coming 12 months in June. However, the employment net balance dropped to 9% in June from 16% in February. The moderation in confidence regarding hiring was largely driven by service providers amid concerns surrounding new business inflows. Overall confidence, however, was stronger than the global trend, which signaled no change in employment over the coming year.

“Although firms that expected employment to increase over the coming year bucked the global trend of no change, the net balance of companies that projected a rise was among the lowest in the series history,” said Siân Jones, economist at IHS Markit. “Service providers were particularly guarded in their expectations amid acute challenges for consumer-facing firms.”

Optimism softens

The net balance of firms expecting a rise in business activity dropped to 15% in June from 20% in February. This was the second-lowest net balance since October 2016, as companies expressed greater uncertainty surrounding the Covid-19 outbreak and the subsequent impact on the private sector.

That said, a number of US private sector firms expected output to increase over the coming year. Anecdotal evidence suggested that higher business activity is likely to stem from access to new markets, with some expecting clients to switch their supply chains towards domestic suppliers. Others suggested that the continuation of low interest rates could aid growth, and the introduction of a vaccine over the coming year would help to boost new sales and improve demand conditions.