November data pointed to a positive month for the U.S. service sector, with output, new business and employment all rising at a faster pace. At the same time, cost pressures remained muted but prices charged rose at the most marked rate since June. Looking ahead, service providers are optimistic about the year-ahead business outlook, but confidence was again weaker than seen on average since the survey began in late-2009.
Adjusted for seasonal influences, the final Markit U.S. Services PMI™ Business Activity Index registered 56.1 in November (flash reading 56.5), up from 54.8 in October. The current period of sustained output growth now stretches beyond two years, and the latest upturn in activity was the fastest since August. Survey respondents cited favourable underlying market conditions and an associated improvement in both business and consumer expenditure.
At 55.9 in November, up from 55.0 in October, the seasonally adjusted final Markit U.S. Composite PMI™ Output Index signalled the strongest expansion of private sector activity since May. Faster service sector growth helped to offset a slowdown in manufacturing production during November (index down from 55.6 to 54.8).
New work received by service providers increased at a robust and accelerated pace in November, thereby mirroring the trend seen for business activity. The latest rise in new order was the strongest since July. Anecdotal evidence pointed to the launch of new products, improving economic conditions, and a boost from reduced pressure on household budgets.
Backlogs of work at service providers decreased for the fourth consecutive month in November. A number of survey respondents noted that sustained job hiring had helped to alleviate pressure on operating capacity at their units. Latest data indicated that employment growth picked up since October, but was still weaker than the average for 2015 to date.
The proportion of service providers expecting to increase their business activity over the year ahead (41%) continued to exceed those that forecast a reduction (6%). However, latest survey indicated that optimism remained below its post-crisis trend. In some cases, panel members cited uncertainty regarding the interest rate outlook.
Meanwhile, service providers indicated only a modest increase in their average input prices, helped by lower food and transportation costs. Although still modest overall, the rate of output charge inflation across the service sector picked up to its fastest since June.