Monday, March 4, 2024

The US service sector rebounded in November

The US services sector bounced back in November thanks to a pick-up in business activity, although new orders remained strong and a gauge of input inflation fell.

The Institute for Supply Management (ISM) said on Tuesday that the non-manufacturing Purchasing Managers’ Index (PMI) rose to 52.7 in November from a five-month low of 51.8.

A reading above 50 indicates growth in the service sector, which represents more than two-thirds of the economy. Economists polled by Reuters expected the index to rise to 52.0.

The Federal Reserve raised the official interest rate by 525 basis points in the last 20 months, to the current range of 5.25%–5.50%, to cool inflation due to the impact of the COVID-19 pandemic.

Although the economy continued to improve during the summer, economists expect demand to weaken this quarter, especially in the service sector, as consumers return to spending more on goods.

The US central bank will accept this change in trend in its struggle to return inflation to the 2% target due to the stubbornness of inflation in the service sector.

There are encouraging elements for those responsible for monetary policy. An indicator of new orders received by service companies was 55.5 last month, unchanged from October, while an indicator of prices paid by service companies for inputs fell. to 58.3 from 58.6 in October.

Consumer spending rose moderately in October, while the annual increase in inflation was the smallest in more than two and a half years, government data showed on Thursday.

So-called core inflation, which excludes energy and housing prices, rose 0.1% after rising 0.4% last month.

The ISM survey also showed that employment in the service sector rose to 50.7 from 50.2 in October.

World Nation News Desk
World Nation News Desk
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