Business activity continued to rise sharply across the U.S. service sector in October, but the pace of expansion slowed further from its recent post-crisis peak. Meanwhile, a solid increase in payroll numbers was maintained during the latest survey period, but service providers’ confidence towards the business outlook was the least positive since July and close to its lowest for two years.
Adjusted for seasonal influences, the final Markit U.S. Services Business Activity Index registered 57.1 in October (‘flash’ reading 57.3), down from 58.9 in September but still well above the 50.0 no-change mark. The headline index has pointed to slower service sector output growth in each month since July, with the latest reading the weakest for six months
Service sector activity growth reflected robust new business gains in October. Reports from survey respondents suggested that improving underlying demand and strengthening domestic economic conditions had supported sales volumes. However, the latest expansion of overall new business intakes was slower than the three-month high recorded in September.
Employment growth was maintained across the service sector, which continued the trend seen in each month since March 2010. Increased payroll numbers reflected the launch of new products and a further accumulation of unfinished work in October. Volumes of outstanding business have now increased in five of the past six months, and the latest rise was close to the survey-record pace seen in September.
Despite strong pipelines of incoming new business and work-in-hand (but not yet completed), the latest survey highlighted a moderation in service providers’ confidence towards the business outlook. The degree of positive sentiment was the second-lowest recorded since November 2012.
Meanwhile, average cost burdens continued to rise across the service economy in October. However, the latest index reading signalled that input price inflation eased slightly to its lowest for three months and was weaker than the survey average. Service providers also pointed to a moderation in output charge inflation at their units in October. Higher average tariffs have been recorded in each month since July 2013, but the latest increase was less marked than September’s five-month peak.