Businesses in the US say customers are unwilling to spend on goods and services, with almost half of those participating in a survey reporting fall in spending or no spending. A total of 41 per cent of businesses who participated in the survey by S&P Global said that customer spending is normal and 48 per cent reported a fall in spending or no spending. Businesses across industries reported a sharp drop in demand compared with the previous quarter, with manufacturing reporting an 18 percentage drop in spending index and software & IT services, finance, healthcare, retail and business services reporting a double-digit decline in demand.

US inflation (44 per cent) is acting as the greatest macroeconomic threat to US businesses. Supply chain disruption which is a key contributor to rising prices, is threatening 29 per cent of businesses. The S&P report said that high energy and fuel costs are acting as primary causes for rising prices in the US in the second quarter. Other factors are rising input costs and higher wages/ compensation, said the respondents. US government policies, including quantitative easing, are also considered a primary cause for rising prices by 42% of respondents.

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More pressure on small businesses & more large enterprises struggling

While pressure to raise prices is higher on smaller businesses (48 per cent versus 46 per cent in Q1), more large enterprises are struggling (41 per cent versus 35 per cent in Q1). Besides, pressure to raise prices on the manufacturing industry eased while the pressure increased for retail businesses and software and IT services industry remained the least under pressure to raise prices.

Meanwhile, there is also a threat from rising US interest rates. About 32 per cent of businesses are thinking of reducing capital expenditure if the planned interest rate hikes by the US Fed continue over the next 12 months. In such a scenario, around 28 per cent of businesses are deferring plans to borrow and this is similar for both SMEs and large enterprises. Further, businesses are also planning to cut their budgets for the second half of 2022.