Services Sector Unexpectedly Weakens In November As Input Prices Hit Record High
After a mixed picture in October (manufacturing weaker, services stronger), preliminary November data was expected to show improvements in both segments of the economy, despite Americans’ sentiment sinking to decade lows. However, Markit saw things differently as while Manufacturing did bounce back a little (from 58.4 to 59.1) but Services weakened from 68.7 to 57.0 (2month lows).
As the chart above shows, US economic data has surprised to the upside very recently – but we warn that this is mostly due to ‘soft’ survey data spiking higher on hope as the stimulus bills near, and not hard economic data…
Services firms sought to expand their workforce numbers, but employment growth was held back by challenges finding suitable candidates.
This also sent the Composite PMI lower (from 57.6 to 56.5)…
Commenting on the PMI data, Chris Williamson, Chief Business Economist at IHS Markit, said:
“The US economy continues to run hot. Despite a slower rate of expansion of business activity in November, growth remains above the survey’s long-run pre-pandemic average as companies continue to focus on boosting capacity to meet rising demand.
“However, the slowdown underscores how the economy is struggling to cope with ongoing supply constraints. Although supplier delivery delays eased to the lowest for six months, the lengthening of lead times remains far greater than anything seen prior to the pandemic, restricting output relative to demand and once again causing prices to rise sharply.
“Input cost inflation spiked sharply higher in November to reach a new survey high, adding to pressure for firms to pass the recent surge in costs on to customers in order to protect margins. Although some resistance to higher prices was seen in the survey responses, serving to dampen demand growth to the slowest for nearly a year, average prices charged for goods and services continued to rise at an unprecedented rate.”