U.S. service activity grows at robust pace in November, service providers positive of growth prospects

Service sector firms in the U.S. recorded another strong growth in business activity in the month of November, with the pace of growth close to the 11-month peak seen in October. The Markit Flash U.S. Services PMI Business Activity Index, adjusted for seasonal influences, dropped marginally to 54.7 in November from 54.8 in October, the second strongest in more than past 12 months. Thus, the average reading in the fourth quarter so far indicates towards the most rapid upturn in business activity since the fourth quarter of 2015.

Service providers in the U.S. commented on firmer demand from consumers as well as businesses in November, assisted by the rebounding economic backdrop. Certain companies also recorded that the completion of the election cycle had a favorable effect on client spending, noted Markit. The latest data showed that the overall new business growth expanded for the second straight month and was the most rapid since November 2015.

Meanwhile, service sector firms recorded a drop in backlogs of work in the month, in spite of a sharper upturn in new orders. The decline in unfinished business was the first since June, which certain companies connected to increased investment spending and greater payroll figures. However, the pace of staff hiring was quite modest and continued to stay weaker than the average seen since the jobs rebound started in early-2010.

Service providers indicated an optimistic assessment of their growth outlook for the coming 12 months. The extent of optimism alleviated a bit since October but continued to be quite above the post-crisis low seen in June. Survey respondent cited an expected rebound in the U.S. economic conditions and an associated rise in client spending, said Markit.

In the meantime, the latest survey showed that input price inflation slowed from October’s 15-month high. Weak cost pressures and intense competition for new work added to a renewed deceleration in prices charged inflation. Data for November hinted at only a marginal rise in average charges amongst service sector firms, with the pace of inflation the weakest since April.

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