By Lucia Mutikani
WASHINGTON- US services sector activity slowed in November after posting big gains in recent months, but remained above levels consistent with solid economic growth in the fourth quarter.
The Institute for Supply Management survey on Wednesday also showed businesses are worried about potential tariffs on imports from President-elect Donald Trump’s incoming administration, warning of higher prices. Economists have echoed similar sentiments. Trump has said he would impose a 25 percent tariff on all products from Mexico and Canada and an additional 10 percent tariff on goods from China on his first day in office.
Nonetheless, the economy’s outlook remains favorable. The Federal Reserve’s Beige Book report on Wednesday showed that while economic activity increased slightly in most US central bank districts in November, businesses were optimistic that demand would rise in the months ahead.
Fed Chair Jerome Powell was also upbeat on the economy, saying at a New York Times event that “it’s in remarkably good shape.”
“Many businesses fled to the sidelines in terms of capital spending plans in advance of the election,” said Stephen Stanley chief US economist at Santander US Capital Markets. “I am generally optimistic about the medium-to-long-term outlook for business investment, but firms are likely to take their time before reengaging, waiting to see the details of tax, regulatory, and trade policy from the incoming administration.”
The ISM said its nonmanufacturing purchasing managers index slipped to 52.1 last month after surging to 56.0 in October, which was the highest level since August 2022.
Economists polled by Reuters had forecast the services PMI would ease to 55.5. A PMI reading above 50 indicates growth in the services sector, which accounts for more than two-thirds of the economy. The ISM views PMI readings above 49 over time as generally indicating an expansion of the overall economy. -Reuters
