Today's Report (11/23/2021)

US private sector firms signaled a sharp upturn in business activity during November, despite the rate of expansion slowing from October. Softer overall growth was largely led by the service sector, as manufacturers posted a slightly stronger increase in production. Nevertheless, pressure on capacity remained stark as labor and material shortages weighed on the private sector.

Adjusted for seasonal factors, the IHS Markit Flash US Composite PMI Output Index posted 56.5 in November, down from 57.6 in October. Although stronger than the lows seen in August and September, rising prices, poor input availability and challenges finding suitable candidates for vacancies reportedly held back the overall expansion.

The seasonally adjusted IHS Markit Flash US Services PMI™ Business Activity Index fell to 57.0 in November, down from 58.7 in October. Nevertheless, service sector firms signaled a sharp upturn in output, with the rate of expansion remaining historically elevated. Many firms noted that the uptick in business activity was supported by greater travel both domestically and internationally and the further easing of COVID-19 restrictions.

The health of the manufacturing sector improved at a steeper pace in November, as highlighted by the IHS Markit Flash US Manufacturing Purchasing Managers’ Index (PMI)1 picking up to 59.1 midway through the final quarter, up from 58.4 in October. That said, production continued to be hampered by raw material delays and labor shortages, with vendor performance deteriorating substantially yet again.

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What Is It?

The Service PMI release is published monthly by Markit Economics. The data are based on surveys of over 400 executives in private sector service companies. The surveys cover transport and communication, financial intermediaries, business and personal services, computing & IT, hotels, and restaurants.

The US Markit Composite PMI is the composite report on manufacturing and services.

What Are The Fundamental Effects?

An index level of 50 denotes no change since the previous month, while a level above 50 signals an improvement, and below 50 indicates a deterioration. A reading that is stronger than forecast is generally supportive (bullish) for the USD, while a weaker than forecast reading is generally negative (bearish) for the USD.

How Does It Affect The Markets?

CURRENCY - Typically with a release of 50 or higher the dollar might bounce higher as it suggests the economy is doing well and inflation is in check.

STOCKS - The Equity market generally reacts positively to a rising PMI, however, if the economy is already in high gear it could suggest an overheating economy and the Federal Reverse might boost interest rates to cool business activity.

BONDS - A release consistently above 50 is typically viewed as bearish for fixed incomes because if the economy is also into an expansionary phase it could aggravate inflation and invite higher interest rates.