In a noteworthy development, the US services sector demonstrated a rebound in November, marked by an uptick in business activity, as reported by the Institute for Supply Management (ISM) on Tuesday. The non-manufacturing Purchasing Managers’ Index (PMI) rose to 52.7, up from October’s 51.8, which had marked a 5-month low. This positive momentum suggested an overall growth in the services sector, responsible for more than two-thirds of the nation’s economy.
The Federal Reserve’s proactive measures in raising the policy rate by 525 basis points over the past 20 months to the current range of 5.25%-5.50% were evident in the economic landscape. These efforts were aimed at curbing high inflation primarily stemming from the aftermath of the COVID-19 pandemic. The impact of higher interest rates was reflected in the stagnant new orders, a key component that remained flat despite the overall sector growth.
Economists, who had anticipated a more modest increase to 52.0, noted the resilience of the services sector amid broader economic challenges. While the summer witnessed a flourishing economy, projections suggested a potential weakening in demand for services during the current quarter. Consumers were expected to shift their spending preferences towards goods, a trend that aligns with the ongoing efforts to counter the persistence of inflation within the service sector.
Encouragingly, key indicators provided some relief for policymakers. The measure of new orders received by services businesses held steady at 55.5 in November, unchanged from the previous month. Additionally, the gauge of prices paid for services inputs showed a marginal dip from 58.6 in October to 58.3 in November, indicating a slight easing in input inflation.
Recent government data painted a mixed picture of the economic landscape. Consumer spending exhibited a moderate rise in October, while the annual inflation increase was the smallest in over 2-1/2 years. Notably, the super core inflation, a measure excluding energy and housing costs from Personal Consumption Expenditures services, rose by a modest 0.1%, down from the 0.4% increase in the preceding month.
The ISM survey also shed light on employment within the services sector, reporting a rise from 50.2 in October to 50.7 in November. This modest increase in employment levels suggests a continued but measured expansion in the workforce within the services industry.
In conclusion, the notable growth in the services sector, as evidenced by the latest ISM report, serves as a beacon of resilience in the face of economic uncertainties, offering a promising outlook for the continued expansion of this vital component of the U.S. economy.
Source: Reuters
