US business activity contracted for a third straight month in September, though the pace of decline slowed while improving global supply chains eased inflation pressures for companies.

S&P Global said on Friday its flash US Composite PMI Output Index, which tracks the manufacturing and services sectors, rose to 49.3 this month from a final reading of 44.6 in August.

A reading below 50 indicates contraction in the private sector. Discounting the slump during the first wave of the Covid-19 pandemic in the spring of 2020, business output in the third quarter was the weakest since the 2007-2009 global financial crisis.

The S&P Global survey, however, likely exaggerates the slowdown in economic activity. The Institute for Supply Management surveys have shown manufacturing and services industries growing steadily so far this year, challenging the notion that the economy was in recession.

Though gross domestic product contracted in the first and second quarters, the income side of the growth ledger showed the economy growing at a moderate pace over that period.

The economy is slowing as the Federal Reserve aggressively tightens monetary policy to cool demand and bring inflation back to the US central bank's 2% target.

The Fed delivered a 75-basis-point rate hike on Wednesday, its third straight increase of that size. It signaled more large increases to come this year.

The flash composite new orders index rebounded to 51.2 from a final reading of 47.4 in August.

The survey's measure of prices paid by businesses for inputs fell to 66.8, the lowest since January 2021, from a final reading 70.5 in August, reflecting an easing in supply bottlenecks. Businesses are also not raising prices for their products as much as they did earlier in the year, in part because of slowing demand.

The survey's flash manufacturing PMI nudged up to 51.8 this month from 51.5 in August. Economists polled by Reuters had forecast the index slipping to 51.1. New orders grew for the first time in four months in September.

With input price increases slowing, average operating expenses for manufacturers rose this month at the slowest pace since November 2020.

The survey's flash services sector PMI rose to 49.2 from 43.7 in August. Services businesses also reported a moderation in input prices as costs for some materials declined.

Companies passed on the cost savings to their clients where possible. Should the trend continue, that could help to lower inflation in the months ahead. Annual consumer prices increased 8.3% in August.