Service sector recovery drives US business expansion in November, recording the strongest growth in four months.

In November, business activity in the United States accelerated and expanded at the strongest pace in four months, benefiting from a faster growth in the service sector, while business confidence in the future economic outlook significantly improved. The preliminary composite output index released by S&P Global on Friday rose slightly by 0.2 points to 54.8, higher than 50 indicating economic expansion. The service sector index concurrently rose to a four-month high, while the pace of expansion in the manufacturing sector slowed down. Chief Business Economist at S&P Global Market Intelligence, Chris Williamson, noted, "Business confidence for the next year has significantly improved, which is a very positive sign." He mentioned that the expectation of interest rate cuts and the end of the government shutdown in the United States boosted business optimism, while concerns about the political environment diminished, leading to an overall improvement in economic confidence. The most notable part of the data was the composite index for future output, which increased by 7.3 points, marking the largest monthly increase in five years. However, inflationary pressures rebounded in November for the first time since July. Businesses continued to report higher costs due to increased import tariffs. The materials price payment index rose to 63.1, the second highest level in three years. The input cost index for the service sector also rose to its highest level since early 2023, while service fees prices also increased in sync. In the context of high costs, moderate job recruitment and a slight decrease in the overall employment index were maintained. On the demand side, the composite new orders index rose to a high for the year, driven entirely by a rebound in service sector demand. The manufacturing sector faced more severe challenges, with slowing growth in new orders and a substantial increase in finished goods inventories. Williamson warned, "Manufacturing is facing a worrying combination of slowing order growth and record increases in finished goods inventories. Unless demand rebounds, factory output expansion may slow in the coming months." Data showed that the manufacturing sector's finished goods inventories index rose to its highest level since records began in 2007, while backlogs of orders decreased, leading factories to reduce raw material purchases in November for the first time since April. Overall, the U.S. economy continued to expand robustly driven by the service sector, but new uncertainties arose from manufacturing inventory pressures and rising costs, which may affect production momentum in the coming months.