US services sector activity hit a one-year high in November, with a surge in production boosting hiring, further evidence of strength in the economy that clears the way for the Federal Reserve to raise interest rates next week. Monday's bullish report from the Institute for Supply Management (ISM) followed data last week showing strong job gains in November which helped drive the unemployment rate to a nine-year low of 4.6 percent.
"The US economy looks solid heading into year-end and, backed by a tightening labour market, the Fed is set to raise rates next week," said Robert Kavcic, a senior economist at BMO Capital Markets in Toronto. The ISM said its non-manufacturing activity index jumped 2.4 percentage points to 57.2, the highest reading since October 2015. A reading above 50 indicates expansion in the sector, which accounts for more than two-thirds of US economic activity.
Services industries reported a 4 percentage point surge in production last month. A measure of services sector employment soared 5.1 percentage points to a 13-month high. While industries reported a modest decline in new orders, the new orders gauge remained well above expansionary territory. A sub-index for export orders increased solidly last month.
The strong services sector sentiment was also captured in a separate survey from data firm Markit, which showed a gauge on new orders rising to its highest level since August 2015 and a measure of new business at a one-year high. Prices for US Treasuries fell on Monday, with the 30-year Treasury bond briefly falling one point on the data before reversing losses following a large block purchase of ultra bond futures. The dollar traded lower against a basket of currencies, while US stocks rose. The Fed is expected to increase borrowing costs at the December 13-14 policy meeting. The US central bank raised its benchmark overnight interest rate last December for the first time in nearly a decade.
Comments
Comments are closed for this article.