By Xavier Fontdegloria

The U.S. economy contracted again in September, albeit at a softer pace than in the previous month as demand recovered, according to a purchasing managers survey published Friday.

The S&P Global Flash Composite Output Index, which tracks activity in the manufacturing and services sectors, rose to 49.3 in September from 44.6 in August. The index suggests the economy contracted slightly over the month as it came in below the 50.0 no-change mark, but also indicates the pace of contraction eased compared with August.

The indicator has signaled contraction in activity for three consecutive months, a quarter that could be the weakest for the economy since the global financial crisis if the pandemic lockdowns of early 2020 are excluded, S&P Global chief business economist Chris Williamson said.

In September, output declined for both manufacturing and services, but in both cases the rate of contraction moderated, particularly for services.

The flash U.S. services PMI rose to 49.2 in September from 43.7 in August, a three-month high and above the 45.3 consensus forecast from economists polled by The Wall Street Journal.

Services providers reported an uptick in new orders, but the increase was small as high inflation and rising interest rates weigh on sales, the report said.

Orders also swung back to expansion for U.S. manufacturers, which saw overall activity growing at a two-month high.

The U.S. manufacturing PMI increased to 51.8 in September from 51.5 in August, beating the 51.2 expected by economists.

However, relatively muted demand and supply chain constraints continued to hamper output and capacity, with backlogs of work increasing again, S&P Global said.

Price pressures among manufacturers and services providers persisted, but eased in September for the fourth consecutive month due to softening demand and less supply shortages, marking the slowest increase in prices since the start of 2021, the report said.

"Inflation pressures nevertheless remain elevated by historical standards and, with business activity in decline, the surveys continue to paint a broad picture of an economy struggling in a stagflationary environment," Mr. Williamson said.

Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com

(END) Dow Jones Newswires

September 23, 2022 10:19 ET (14:19 GMT)