The US service sector saw a notable acceleration in growth during November, with marked increases in both business activity and new orders, according to the latest S&P Global US Services PMI® data released on Wednesday. The seasonally adjusted Business Activity Index rose to 56.1, up from 55.0 in October, marking the fastest expansion since March 2022 and the 22nd consecutive month of growth. The surge in new business, particularly following the conclusion of the Presidential Election, gave companies the confidence to secure new orders. Lower interest rates also played a role in driving demand. As a result, new orders hit their highest level in over two-and-a-half years, supported by a fifth consecutive monthly increase in new business from abroad. However, despite the strong demand, companies remained cautious about hiring. Employment declined for the fourth consecutive month, contributing to a backlog of work, which rose at the fastest pace since May 2022. The reluctance to hire was attributed to continued uncertainties and higher staffing costs, leading some businesses to reduce their workforce slightly or not replace leavers. While input costs remained elevated, the pace of inflation slowed in November, and output price increases eased to their slowest rate in over four years. Some firms raised their prices in response to higher costs, while others lowered charges due to competitive pressures. Despite these challenges, the overall sentiment in the service sector remained positive. Businesses expressed optimism for the year ahead, with expectations of continued growth supported by new product launches, marketing strategies, and the anticipation of favorable economic conditions under the incoming administration. However, confidence dipped slightly from October, reflecting some caution about future conditions. S&P Global US Composite PMI®: Overall Economic Activity Hits 31-Month High The S&P Global US Composite PMI® Output Index also showed strong growth in November, rising to a 31-month high of 54.9 from 54.1 in October. This increase reflects robust expansion in services, though manufacturing output continued to decline. Despite challenges in manufacturing, there were signs of stabilizing demand, and the overall growth in new orders reached a two-and-a-half-year peak. Output price inflation slowed, marking the weakest rise in four-and-a-half years. The November data highlights a dynamic US economy, driven by service sector growth, with businesses cautiously optimistic about future prospects despite some ongoing challenges. "Improved service sector output offset a further decline in manufacturing during November, helping drive the overall pace of growth of business activity to the fastest for over two and a half years." said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence. "The recent survey data are consistent with GDP growing at an annualised 2.6% rate in the fourth quarter, assuming a similarly robust expansion is seen in December. Attribution: S&P Global Download
