US services sector activity cooled off in November if you can believe it.
The engine of the world’s largest economy decelerated last month, according to the marquee gauge of services activity, released on Wednesday.
At just 52.1, the headline ISM print came in well below consensus. Economists collectively expected 55.7.
Although the final read on S&P Global’s gauge for November remained robust, at 56.1, it was revised lower from the flash print, a blistering 57.
While activity expanded in most industries covered by the ISM survey, all of the major subindexes evidenced a marked decline in the pace of that expansion, as new orders and production slipped to 53.7 from 57.4 and 57.2, respectively, while the employment gauge dropped to 51.5 from 53.
Unfortunately, the prices gauge ticked up to 58.2 against expectations for a slight drop.
The services price index is now the second-highest since April, when the Fed was concerned about an inflation re-heat. The figure above’s apples to oranges, and as such it’s not necessarily meant to be ominous. But… well, it is what it is.
ISM’s Steve Miller said panelists mentioned “election ramifications and tariffs… often” this month, but were generally optimistic — “neutral to positive,” as he put it.
Chris Williamson, S&P Global’s chief business economist, weighed in with some overtly cheery color, but expressed “surprise” that a measure of services hiring wasn’t stronger. He cited “ongoing labor supply issues and the potential for stubborn wage growth.”
That said, Williamson was encouraged that “prices charged for services rose only very slightly [despite] another month of above-average input cost inflation.” Competition for customers, it would appear, is moderating the inflation impulse.
“Commentary from Fed officials has leaned dovish over the past week, suggesting subdued data will give them greater confidence to cut rates on December 18,” ING’s James Knightley remarked. “This week’s ISM reports have ticked that box and a soft jobs number on Friday would likely seal the deal even if next week’s inflation data remains sticky.”
