In October, the private-sector output in the United States experienced robust expansion despite a continuing contraction in manufacturing. The forward-looking metrics are particularly encouraging, with the year-ahead outlook reaching a remarkable 29-month high, as indicated by S&P Global's flash purchasing managers' index.
The composite output index has risen to a noteworthy two-month high of 54.3 this month, which is a slight increase from 54 in September, and it stands above the 53.8 consensus previously estimated in a survey conducted by Bloomberg. Notably, the pivotal 50-point threshold serves as the line between economic expansion and contraction. According to the latest report from S&P Global, the new orders for goods and services have surged, marking the sharpest increase seen in the last 17 months.
Chris Williamson, the Chief Business Economist for S&P Global Market Intelligence, articulated, "October saw business activity continue to grow at an encouragingly solid pace, sustaining the economic upturn that has been recorded in the year to date into the fourth quarter." In terms of specific sector performance, the service sector output witnessed a modest uptick, moving to 55.3 in October from 55.2 previously, while the manufacturing PMI showed a slight increase to 47.8 from 47.3, both figures aligning closely with Wall Street's expectations of 55 and 47.5, respectively. The service sector is leading the charge, with the highest increase in new business since April 2022, driven largely by increasing domestic demand.
This boost has helped to alleviate a marginal decrease in export orders reported in the same timeframe. Despite these gains, the manufacturing output has faced challenges, decreasing for a consecutive third month, with the report indicating that the rate at which orders are lost remains steep. Employment data for October indicates a third consecutive monthly decline, although the drop remains modest compared to the more significant reductions recorded in the preceding months.
Moreover, the average prices charged for goods and services have experienced a markedly reduced growth rate, showing the smallest monthly increase since May 2020 according to S&P Global. Looking forward, there is a wave of optimism regarding consolidated output, which has seen a remarkable rise to a 29-month high this month.
This positive sentiment is being propelled by both service providers and firms within the manufacturing sector, who are bouncing back from a 23-month low recorded in September. The positive outlook is reinforced by expectations of reduced inflation and interest rates, along with anticipations of stronger economic growth in the upcoming year. Williamson noted, "Companies hope that a stabler post-election environment is more conducive to growth.
This is especially true in the manufacturing sector, where factories are optimistic that the current soft patch in production and sales will reverse as the uncertainties stemming from the political landscape diminish." As a reminder, the US presidential election is set to take place on November 5, adding an element of significance to these economic forecasts..