The Flash US Composite PMI data from IHS Markit has shown a moderate slowdown in growth in the services industry which is nevertheless described as healthy with a reading of 54.4 compared to last month’s 54.8.
Key Takeaways
- The index is now at a two-month low, with any reading over 50 showing continued growth.
- New work expanded much more slowly than in October.
- Business activity has grown steadily, but dropped this month.
- Weaker business growth lead to reduced recruitment.
The weaker rate of business growth had a knock-on effect in the services industry, leading companies to exercise more caution in their staff recruitment and creating a softening rate of jobs created, with the index showing that the rate of new jobs was the softest since June 2017.
Price inflation has reportedly eased off with cost pressures becoming more moderate for service sector companies. Operation costs increased with the most moderate rise seen in three months in the sector, which in turn impacted average prices which saw the most moderate increase since June.
Expert Outlook
IHS Markit’s Chief Business Economist Chris Williamson stated that the data could be viewed as positive overall by policymakers, but that there were a few red flags indicating a coming slowdown in economic growth, a view which has been reflected by many other economists.
Following the record-breaking highs seen in employment, production, and orders recently, many have viewed the current rate of expansion as unsustainable, and Williamson states that pressure in goods exports due to the trade war as well as the hiring slowdown seen in the latest data are both indicators of a pullback over the coming months.
However, Williamson pointed out that the “US is enjoying sustained robust economic growth in the fourth quarter” and added:
“With growth remaining reassuringly robust and price pressures elevated, policymakers will be encouraged that the economy has so far withstood both the headwinds of trade war worries and the steady progress made to date towards normalizing interest rates.”
Market Reaction
Following the celebration of Thanksgiving yesterday in the US, activity in the gold market has been predictably mild. Today gold is showing moderate losses with little reaction seen so far to the latest Flash PMI data.
Spot gold last traded at $1,226.3/oz with a 0.18% drop on the day while December Comex Futures are trading at $1,224.0/oz and are down 0.33% on the day.
Gold Price Chart
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