U.S. service sector’s business activity sees rapid growth in November, PMI index rises to 51.6

Service sector companies in the U.S. hinted at a more rapid growth in business activity in November. The IHS Markit US Services Business Activity Index rose to 51.6 from October’s 50.6, indicating a further upturn in output throughout the U.S. service sector.

The growth was just marginal and below the long-run series trend. However, the pace of growth accelerated to a four-month high which firms linked to an uptick in client demand. Accordingly, new business recovered from the slight contraction recorded in the prior month and expanded at the most rapid pace since August. Although comparatively subdued, the marginal upturn was attributed to the acquisition of new clients and stronger domestic demand.

On the contrary, new business from abroad shrank for the fourth consecutive month through the final quarter of 2019. The pace of fall was slight and the slowest for three months, but compared unfavourably with the series trend. Meanwhile, companies showed a lower level of positive sentiment towards the outlook for output in the coming 12 months in November. Ongoing global economic uncertainty weighed on expectations, with the majority of respondents forecasting no change in activity in the next year.

In the meantime, service providers marked the first rise in workforce numbers since August. Although only fractional, employment growth was attributed to greater workloads, with the pace of job creation reaching the fastest for four months.

Renewed strain on capacity was also shown in a rise in the level of outstanding business at service sector companies. The accumulation of backlogs of work in November hinted at a sharp turnaround from September’s strong decline in work-in-hand.

Service providers also saw a more rapid pace of prices charged inflation. However, the pace of rise was just marginal. However, where a rise was reported, firms linked this to the partial pass-through of higher costs to clients.