November’s flash PMI surveys provide the first snapshot of US business conditions in the wake of the surprise election result, and show a reassuring picture of sustained solid economic expansion and hiring. As such, the surveys give a clear green light for the Fed to hike interest rates again in December.
Markit PMI v US GDP
Further robust growth
At 54.9, the flash Composite PMI showed business activity across manufacturing and services growing at a rate unchanged on October, which had in turn been the fastest for almost a year. The surveys indicate that the economy is expanding at a respectable annualised rate of 2.5% in the fourth quarter.
An acceleration in growth in manufacturing, fuelled mainly by rising domestic demand and an easing in the recent inventory-adjustment drag, offset a slight cooling in service sector growth, although even the latter notched up a robust expansion overall.
Manufacturing output
Services activity
Steady hiring
Hiring also continued at a solid pace, with the survey’s employment indicators consistent with non-farm payrolls rising by 135,000 in November. Employment continued to be driven by the service sector, although factory jobs rose at an increased rate in November.
Brighter outlook
The surveys therefore add to indications that the US economy has pulled out of a slow growth phase which had in turn been in part linked to uncertainty in the lead up to the presidential election. Indeed, companies reported in November that customer enquiries were either already increasing or expected to start rising again after an election-related lull. Business confidence in the service sector dipped compared to October’s 14-month high, but was still the second-highest since January.
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