(Notes): IHS Markit U.S. Services PMI ™- final data (with composite PMI ™)
➪ Service sector output expansion softens to a five-month low.
➪ An upturn in new business accelerates.
➪ Business confidence slips to joint-weakest since February.
The NMI survey responses from November are signaling businesses are expanding at a slower pace. On the other hand, companies showed to be betting on the high probability of a corporate tax reform agreement being reached between the House and Senate, with the survey results from November showing robust growth in new business activity.
An expected increase in seasonal hires was indicated by Employment growth hitting a three-month peak. The survey notes that this growth in Employment helped alleviate capacity pressures. This could help business squeeze the most out of their 4th quarter earnings results. Because,
Inadequate or improper capacity management can affect a company’s financial performance and impede its business prospects
Moreover, with increased employment being reported, the survey indicated a drop in backlog order accumulation now being at a five-month low. Thanks, team!
The Fed will be ecstatic to see that inflationary pressures “intensified” across the board in input prices and output charges. Merry Christmas Janet.
Wrapping up the survey results, business confidence was reported to be at their lowest levels since February 2017. I think businesses are getting weary of the breadth of the current expansionary cycle, (e.g., DEFCON 5).
➪ IHS Markit U.S. Services Business Activity Index was reported at 54.5 in November, down from 55.3 in October. However, the copy from Markit cites that the “overall rate of growth was strong by recent standards,” which sounds like, “Yea, the economy is slowing but in relative terms. No one panic. Quietly and calming exit through the door closest to you.” Markit also notes some anecdotal evidence to calm the nerves being that, ” the increased activity was due to greater new order volumes and robust client demand.” Therefore, ” Chew on that you heartless swine. [into tape recorder] Forecast is for “bad craziness”. ”
➪ On a positive note, New orders received by service providers rose in November, with the rate of change expanding from October’s six -month low. Markit panelists attribute the increase in new order to ” more favorable demand conditions (holidays) and the acquisition of new clients.”
Subsequently, the more significant demand conditions induced business to increase hiring, which accelerated modestly to a three-month high. Important to note for an early indicator for tomorrows (12/0617) ADP/ Macroeconomic Advisors LLC’s National Employment Report, the upturn in payroll data is now above the long-run series average.
As noted earlier, the capacity pressures on businesses eased up for the fourth successive month, and aggregate unfinished activity was reported at ancillary levels. Calling into question, full-employment concerns. Companies can only hire part-time, seasonal employees; having no room on the payroll for additional full-time employees.
More on FED-INFLATION-WATCH front, the Markit panelists stated the rise in Average prices charged for service and the rate of inflation increasing in November was due to ” higher input costs which were passed on to clients.” Roger that.
Moreover, ” cost burdens faced by service providers rose at a strong rate that was slightly below the series trend. Noting that the increase in input costs was primarily due to higher goods prices.” Next, they go over the Short-Term Supply & Demand curve.
➪ IHS Markit U.S. Composite PMI™ Output Index, the final seasonally adjusted index fell to 54.4 in November, down from 55.2 in October. A softer resurgence in both the manufacturing and service sector led to a weaker overall output expansion. Noting further that, ” the latest composite index figure indicated the slowest growth in private sector activity since June (2017).”
So that’s that on the NMI print today, in culmination I will leave you with Mr. Chris Williamson Chief Business Economist at IHS Markit and his more elegant commentary to the report.
The slowest growth of sevice sector business activitu since June, alongside a slight dip in the pace of manufacturing expansion, means the November PMI surveys registered a modest cooling in the overall rate of business growth. Mid-way through the fourth quarter, the surveys are still pointing to a reasonable GDP growth rate of approximately 2.5%.
“The surveys’ employment indices are meanwhile pointing to solid non-farm payroll growth of cira 200,000 as companies continue to take on staff in encouraging number to meet rising order books.
“Disappointingly, optimism about the year ahead deteriorated as companies grew increasingly cautious about the outlook for 2018, suggesting risk aversion may start to rise, which could hit hiring and investment. However, for now, businesseses generally reman in expansion mode and the upturn shows few signs of losing momentum to any significant extent.
” In terms of prices, the upturn continues to show signs of gradually feeding thrrough to higher inflationry pressure. Average selling prices for goods and services showes one of the largest increases recorded over the past four years, linked to rising cost pressures.”