There was more evidence Friday to support the contention that the US economy remains resilient, even as activity slows amid a waning fiscal impulse and persistent trade frictions.
Flash reads on IHS Markit’s PMIs were all better than expected for November, with the manufacturing gauge printing 52.2, a 7-month high. Consensus was looking for 51.4.
Services beat estimates too, coming in at 51.6 against an expected 51. That’s a 4-month high.
At 51.9, the composite index signaled the fastest expansion in private sector output since July, although still well below levels observed over the course of the Trump years.
“Although the upturn in service sector new business quickened to a three-month high, the increase was only marginal and weighed on the overall expansion”, IHS Markit said. “Meanwhile, manufacturers registered a solid rise in new orders that was the sharpest since April, with goods producers signaling a further recovery from the slowdown seen earlier in the year”.
This will be seen as good news by market participants concerned over the factory recession implied by the ISM gauge, which has stuck below 50 for three consecutive months. ISM services logged a decent rebound in October, data out earlier this month showed.
“A welcome upturn in the headline index from the flash PMI adds to evidence that the worst of the economy’s recent soft patch may be behind us”, Chris Williamson, Chief Business Economist at IHS Markit, remarked, adding that “a recovery of manufacturing production growth to a ten-month high is especially welcome news, helping to lift service sector activity growth from recent lows”.
Still, the US economy is hardly the kind of bulletproof locomotive the White House is keen to project. Williamson underscores that point. “The picture of current business conditions remains subdued by standards seen over the past decade and the business mood sombre in relation to prospects for the year ahead”, he notes.
If you’re wondering what the November PMIs suggest for GDP, the answer is that the latest surveys are indicative of the economy expanding at an annualized rate of just 1.5%. The read-through for nonfarm payrolls is a monthly clip of around 100,000.
That’s certainly not terrible. But it’s not “great” – “again” or otherwise, as we like to say.
I can never understand why these figures are treated as hard data. They are surveys. Not much better than consumer confidence numbers.