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US service economy gathers pace in November: ISM

H.S. Borji
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The US service economy advanced briskly in November, as business activity and new orders gathered pace and supported another solid month of job creation, a sign employers were gearing up for the busy holiday season.

The Institute for Supply Management’s gauge of national service activity rose 2.2 percentage points to 59.3 in November. The reading was well above the consensus estimate of 57.5.

The US service economy has been above the 50 mark that separates expansion from contraction for 58 consecutive months. The November print suggests services output was edging closer to August’s post-recession high. The PMI print was 59.6 that month.

A total of 14 non-manufacturing industries reported growth in November, led by retail trade, construction and agriculture. The three industries reporting contraction were arts, entertainment and recreation, utilities, and educational services.

Overall business activity picked up in November, as 12 industries reported gains. The business activity sub-index increased 4.4 percentage points to 64.4. The gains were led by agriculture, forestry, fishing and hunting, retail trade, and construction.

New orders growth advanced in November, as 14 industries registered growth, led by agriculture, forestry, fishing and hunting, construction, and other services. The new orders sub-index increased 2.3 percentage points to 61.4.

New export orders increased for the eighth consecutive month, albeit at a slower rate than in October. A total of six industries reported higher new export orders, ISM data showed.

“Business is strong. Many new accounts want to be implemented before year-end so cost reductions can be included,” said one manager from the professional, scientific and technical services industry.

“General uptick in demand/spending,” said another manager from the information industry.

Added another manager from wholesale trade, “We are still seeing continued momentum month-over month with the strongest area being government accounts.”

Stronger business activity supported yet another month of employment growth, ISM said. Service providers increased payrolls for a ninth consecutive month, albeit at a slower rate than in October. The employment sub-index decreased 2.9 percentage points to 56.7. A total of nine industries reported payroll growth last month, led by retail trade, construction, and healthcare.

Services sector employment increased in November, as employers added 176,000 workers, the ADP Institute reported today. However, the figure was well below the October reading of 187,000. Total private sector employment increased by 208,000 last month, ADP data showed. Economists forecast a bigger increase of 221,000.

The Labor Department on Friday will release official employment figures for November. The US economy is expected to add more than 200,000 nonfarm payrolls in November. Most estimates place nonfarm payrolls growth above 225,000, as employers ramp up for the holiday season. The unemployment rate is forecast to hold steady at 5.8 percent.

A separate gauge courtesy of Markit Group painted a slightly different picture of the US service economy in November. The monthly gauge confirmed today output that US services output slowed for a fifth consecutive month amid slower upturns in new business. Markit’s final November services PMI estimate was 56.2. Markit’s composite index, which factors services and manufacturing activity, was at 56.1, down from 57.2 in October.

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