US Business Activity Expands at Slower Pace as Companies Face 'Fiscal Cliff'

Business activity in the U.S. expanded at a slower pace in August, indicating companies may hold the line on production until sales pick up.

The Institute for Supply Management-Chicago Inc. said its business barometer fell to 53.0 this month from 53.7 in July.

Figures greater than 50 signal expansion. Economists forecast the gauge would drop to 53.2, according to the median estimate in a Bloomberg survey.

Companies may lack the confidence to invest in new equipment and hire as they face a global economic slowdown and the so-called fiscal cliff threat of more than $600 billion in government spending cuts and higher taxes.

Manufacturing, which helped spur the recovery, is providing less of a boost for the three-year-old expansion.

“Manufacturing looks like it’s not playing a major role in the expansion any longer but neither is it contracting,” Drew Matus, senior U.S. economist at UBS Securities LLC in Stamford, Connecticut, said before the report. “Manufacturing is just treading water.”