U.S. service sector companies indicated a faster pace of output growth during November, thereby reversing the slowdown recorded in each of the previous two months. At 56.5, up from 54.8 in October, the seasonally adjusted Markit Flash U.S. Services PMI™ Business Activity Index pointed to the strongest increase in output levels since April. Moreover, the latest index reading – which is based on approximately 85% of usual monthly replies – was above the average seen since the survey began in late-2009 (55.8).
Higher levels of business activity have now been recorded for 25 months in a row, with survey respondents attributing the upturn to improving domestic demand and an associated rise in new business volumes. Moreover, latest data signalled that incoming new work expanded at the fastest pace since July. Anecdotal evidence pointed to greater levels of consumer and business expenditure in November, alongside successful new product launches and efforts to boost sales through competitive pricing strategies.
Service providers recorded a solid increase in their payroll numbers during November, which continued the upward trend seen since early-2010. The rate of job creation picked up slightly since October, but remained weaker than seen on average so far in 2015. Some panel members cited a lack of pressure on operating capacity, as highlighted by a reduction in backlogs of work for the fourth consecutive month.
Meanwhile, latest data signalled that input cost inflation remained moderate and below the average since the survey began in late-2009. Service providers commented on lower fuel and food prices in particular. At the same time, prices charged by service sector companies increased for the second month running in November, but the rate of inflation remained subdued. Panel members noted that their pricing strategies reflected relatively weak cost inflation and the need to boost client spending.
Adjusted for seasonal influences, the Markit Flash U.S. Composite PMI Output Index registered 56.1 in November, up from 55.0 in the previous month and the highest reading since April. Stronger overall private sector output growth was driven by the service economy in November, as manufacturers signalled a softer rise in production volumes (‘flash’ output index at 54.6, down from 55.6 in October).