By Xavier Fontdegloria
Activity in the U.S. services sector declined in November at a faster pace than the previous month as high inflation and rapidly rising interest rates weakened demand, according to a purchasing managers survey released Monday.
The S&P Global U.S. Services PMI decreased to 46.2 in November from 47.8 in October, and was little changed from the preliminary mid-month reading of 46.1. This is the fifth consecutive month in which the indicator is below 50, suggesting service-sector activity contracted over the period.
Firms reported a steeper decrease in new orders as both domestic and foreign demand remained weak in November, the report said.
The survey data are consistent with the U.S. economy contracting in the fourth quarter at an annualized rate of about 1%, said Chris Williamson, chief business economist at S&P Global. The data are signals the health of the economy is deteriorating at a marked rate, he said.
New business among services providers fell at the fastest pace since May 2020, when the first wave of the Covid-19 pandemic hit, as inflation and higher interest rates put pressure on customer spending and drove client hesitancy, S&P Global said.
"There are some small pockets of resilience, notably in the tech and healthcare sectors, but other sectors are reporting falling output amid the rising cost of living, higher interest rates, weaker global demand and reduced confidence," Mr. Williamson said. Financial services and consumer-facing services are seeing steep falls in demand, he said.
In this context, inflation pressures continued to abate, according to the survey. The rate of input price inflation eased to the slowest since the end of 2020, while output charges increased at the softest rate for just over two years.
"A striking development is the extent to which companies are increasingly reporting a shift towards discounting in order to help stimulate sales, which augurs well for inflation to continue to retrench in the coming months, potentially quite significantly," Mr. Williamson said.
The S&P Global U.S. Composite PMI, which tracks activity in both manufacturing and service sectors, fell to 46.4 in November from 48.2 in October.
Write to Xavier Fontdegloria at email@example.com
(END) Dow Jones Newswires