⌛ Did you miss ProPicks’ 13% gains in May? Subscribe now & catch June’s top AI-picked stocks early.Unlock Stocks

U.S. business activity steady in November - S&P Global survey

Published 11/24/2023, 09:48 AM
Updated 11/24/2023, 09:50 AM
© Reuters. FILE PHOTO: People carry shopping bags during the holiday season in New York City, U.S., December 15, 2022. REUTERS/Eduardo Munoz/File Photo

By Lucia Mutikani

WASHINGTON (Reuters) - U.S. business activity held steady in November, but employment in the private sector declined for the first time in almost three-and-a-half years, consistent with expectations for an economic slowdown in the fourth quarter.

S&P Global said on Friday that its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, was unchanged at 50.7 this month as a modest rise in services sector activity offset a contraction in manufacturing. A reading above 50 indicates expansion in the private sector.

The survey's flash manufacturing PMI dropped to 49.4 this month from 50.0 in October. Its flash services sector PMI edged up to 50.8 from 50.6 in the prior month.

Economists expect overall economic activity to moderate considerably this quarter as the lagged effects of higher interest rates from the Federal Reserve start to have a greater impact. Since March 2022, the U.S. central bank has raised its policy rate by 525 basis points to the current 5.25%-5.50% band.

The economy grew at a 4.9% annualized rate in the third quarter. Growth estimates for the October-December quarter are mostly below a 2% pace.

The flash composite new orders index increased to 50.4 in November, ending three straight monthly declines. The modest rise from a reading of 49.0 in October was mostly driven by the services sector, with factory orders stagnant.

The lack of strong order growth resulted in businesses shedding workers, with the survey's employment index dropping to 49.7. That was the first contraction since June 2020 and followed a reading of 51.3 in October.

S&P Global said businesses commonly cited relatively muted demand conditions and elevated cost pressures as the reasons for layoffs, which were across both manufacturing and services sectors. Companies were also implementing hiring freezes.

"Job shedding has spread beyond the manufacturing sector, as services firms signaled a renewed drop in staff in November as cost savings were sought," Sian Jones, principal economist at S&P Global Market Intelligence, said in a statement.

The decline in the employment gauge could be flagging a sharp slowdown in the labor market in the months ahead. The labor market has been gradually cooling, with the unemployment rate rising to 3.9% in October, the highest in nearly two years.

An easing labor market will aid the Fed's fight against inflation. That battle is likely to get another boost from subsiding prices for energy and other raw materials.

© Reuters. FILE PHOTO: People carry shopping bags during the holiday season in New York City, U.S., December 15, 2022. REUTERS/Eduardo Munoz/File Photo

The S&P Global survey's measure of prices paid by businesses for inputs fell to 55.7, the lowest level since October 2020, from 57.3 in October. In addition to the lower energy and raw material prices, some firms also reported that a reduction in headcount had eased cost pressures.

Though businesses are still raising prices for their products and services, the pace has slowed considerably from last year.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.