US Service Sector Steady on Cautious Employment Trends (11.05.2024)

As the final quarter of the year began, US service providers sustained strong growth in business activity.

New orders continued to rise steadily, maintaining the solid pace seen in September, although international demand showed some softening. Business confidence rebounded after reaching a 23-month low in September, yet companies continued to make slight staffing reductions due to uncertainty about future demand.

On the pricing side, firms raised their charges at the slowest pace in nearly four-and-a-half years, despite a sharp rise in input costs. The seasonally adjusted S&P Global US Services PMI® Business Activity Index showed continued robust growth in October, with the index slipping only slightly to 55.0 from September’s 55.2, marking the 21st consecutive month of expansion.

Business activity growth was bolstered by a strong increase in new business, as companies reported success in gaining new clients and customer commitment to new projects. New orders rose for the sixth straight month, matching the growth rate seen in September.

Growth in new export orders slowed, reflecting weak international demand, as overseas business rose only marginally at its slowest pace in four months. Business confidence, however, improved in October, reaching its highest level since June. Optimism was driven by expectations for stronger demand after the Presidential Election and predictions of lower interest rates supporting future growth.

Despite the uptick in new orders and business activity, companies remained cautious about workforce expansion. Employment declined modestly for the third consecutive month, though some firms filled vacant positions. This cautious approach allowed companies to manage workloads efficiently, stabilizing levels of outstanding business in October after an increase in September.

To stay competitive, firms eased the rate of price increases, with inflation for selling prices slowing to its joint-lowest level in nearly four and a half years, a rate last seen in January. Price increases, where present, were largely attributed to elevated input costs, primarily driven by higher staff expenses, which continued to exceed the historical average.

Source: S&P Global