In the United States, in November, the measure of business activity reached a mark corresponding to a 31-month high.
The mentioned dynamic of the specified indicator is related to scaling expectations relative to the fact that the central bank of the US will continue cutting interest rates. Also, at present, there is a spreading opinion in the United States, according to which the return of Donald Trump, who won the election for president of the country, to the White House will contribute to the formation of an environment that is more favorable in terms of business conditions.
On Friday, November 22, S&P Global reported that its flash US Composite PMI Output Index in the present month was fixed at 55.3. It is worth noting that this indicator tracks the manufacturing sector and the service area. November reading is the highest since April 2022. In October, the flash US Composite PMI Output Index was fixed at 54.1.
It is worth clarifying that a reading above 50 is evidence of growth in the private sector. The PMI at face value probably signals that economic growth in the United States accelerated in the fourth quarter of the current year. At the same time, the so-called hard economic data like retail sales demonstrates that the economy maintains a solid pace of upward dynamic. There is also data indicating that the housing sector is showing weakness, and the manufacturing area continues to be sluggish.
In the third quarter of the current year, the economic system of the United States showed growth of 2.8% compared to the indicator for the same period in 2023. The Atlanta Federal Reserve nowadays estimates a 2.6% increase in US gross domestic product (GDP) in the fourth quarter of 2024.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said that the rise in the headline flash PMI indicates that economic growth is accelerating in the United States in the current quarter. According to the expert, the prospect of cutting interest rates and the likelihood that the Donald Trump administration will take a more favorable approach to business have become factors of increased optimism. Chris Williamson said that against this background, an increase in output and order book inflows was recorded in the United States in November.
The services sector accounted for much of the increase in the PMI. The downturn in manufacturing leveled off.
The survey’s measure of new orders received by private businesses rose to 54.9 in November. In October, the corresponding figure was 52.8.
Price growth has slowed further. The gauge of average prices paid by businesses for inputs in November was fixed at 56.7. In October, this figure was 58.2.
Businesses were also not pushing through significantly higher prices amid growing consumer resistance.
A measure of prices charged by businesses for their goods and services in November was fixed at 50.8. It is worth noting that this indicator is the lowest since May 2020. In October, the mentioned measure of prices was fixed at 52.1.
The specified indicators contain a reason for an optimistic perception of the realistic prospects that inflation in the United States may resume the downward tendency. In recent months, progress in the downward dynamic of inflation has stalled. The consumer price index rose 0.2% in October for the fourth month in a row. The relevant information was published last week by the Labor Department’s US Bureau of Labor Statistics.
If progress in countering inflation resumes, the Federal Reserve will have the opportunity to continue cutting interest rates. It is worth mentioning that the central bank of the United States began a cycle of easing its monetary policy in September. In the mentioned month, the US financial regulator lowered the cost of borrowing by half a percent. It is worth noting that for many experts, this decision came as a surprise since they predicted a smaller-scale action by the Fed as part of the initial stage of monetary policy easing. In November, the central bank of the United States cut interest rates by another 25 basis points. Currently, the Fed’s benchmark overnight interest rate is in the 4.5%-4.75% range.
In 2022 and 2023, the central bank of the United States increased the cost of borrowing by 525 basis points. The US financial regulator has taken appropriate measures as part of its efforts to counteract inflation.
Businesses in the United States, at the same time, are showing hesitancy about boosting their workforces. It is worth noting that the corresponding situation is observed against the background that US businesses have a confidence level that is the highest in the last one and a half to two years.
The survey’s measure of employment in November was recorded at 49. This indicator did not show significant changes. Services sector employment continued to show a decline, but manufacturing recovered.
The survey’s flash manufacturing PMI in November was recorded at 48.8. In October, this figure was 48.5.
The flash services PMI in November was recorded at 57. This indicator is the highest since March 2022. In October, the flash services PMI was fixed at 55.
