US private sector growth accelerates as inflation eases

The US private sector expanded in November, according to survey data on Friday, as optimism picked up and price growth slowed. The S&P Global flash US composite purchasing managers' index rose to a 31-month high of 55.3 points in November, from 54.1 in October.

US private sector growth accelerates as inflation eases

Rising further above the neutral 50 reading, it indicates a robust rate of expansion. However, the asymmetry of the US economy persisted, with growth being led entirely by the services sector. The flash services PMI jumped to 57.0 from 55.0, beating FXStreet-cited market consensus of 55.3. Meanwhile, manufacturing continued to weaken, with the flash PMI edging up to 48.8 from 48.5, coming in line with consensus. S&P Global noted: "While service sector output rose in November at the fastest rate since March 2022, manufacturing output fell at a rate not seen since December 2022. The resulting divergence in output was the widest recorded since data were first available in 2009 barring only May 2021, amid the re-opening of the economy from pandemic restrictions. "Similarly, while new orders for services rose at a rate not witnessed since April 2022, new orders placed at factories fell for a fifth straight month, albeit registering the smallest decline seen over this period to hint at the production downturn potentially moderating in December."

Optimism grows

Companies were more optimistic about output in the year ahead - particularly in manufacturing. Respondents cited the end of the uncertainty concerning the US Presidential election, and a "more business friendly incoming administration". Moving to prices, prices charged by companies saw a modest rise, slowing to a pace not seen since June 2020. Input cost inflation slowed, but remained slightly higher than the long-run average. "The promise of greater protectionism and tariffs has helped lift confidence in the US good producing sector, which is already feeding through to higher factory employment," said Chris Williamson, chief business economist at S&P Global Market Intelligence.

Factories purchases rise

"Factories are meanwhile stepping up their purchases of imported inputs as they seek to front-run tariffs, putting pressure on supply chains to a degree not seen for over two years. Any further stretching of these supply lines could see prices move higher as demand outstrips supply," he continued. The composite PMI is compiled from responses to survey panels of around 650 manufacturers and 500 service providers, with data collected between November 12 and 21. Final data for the manufacturing PMI is released on December 2, with services and composite final readings on December 4.