Business activity in the United States surged in November to its highest level in nearly three years, bolstered by rising demand, easing inflation, and growing optimism about the incoming administration’s pro-business policies, according to the latest S&P Global Flash PMI and University of Michigan Consumer Sentiment surveys, released on Nov. 22.
“The business mood has brightened in November, with confidence about the year ahead hitting a two-and-a-half year high,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a statement. “The prospect of lower interest rates and a more pro-business approach from the incoming administration has fueled greater optimism, in turn helping drive output and order book inflows higher in November.”
President-elect Donald Trump has promised to roll back bureaucratic hurdles and use tariffs to boost American businesses and encourage re-shoring of production.
While the S&P Global data showed that the improvement in business sentiment was broad-based, it was particularly notable in manufacturing, where it hit a 31-month high. The improvement in confidence in U.S. factories suggests growing hope for a turnaround in America’s manufacturing recession.
Despite the surge in year-ahead business confidence, growth was uneven across the economy.
Service sector activity hit a 32-month high of 57 in November, while manufacturing continued its downturn, although with slight improvement. The manufacturing activity gauge rose from 48.5 in October to 48.8 in November, a four-month high. Any reading below 50 represents contraction.
Other data supported the view that America’s services sector is booming while its factories remain mostly mired in weakness. Output in services rose in November at its fastest pace in 32 months while manufacturing production fell at a rate not seen since December 2022. The difference in output between the two sectors was the second-highest in the history of the survey, which dates back to 2009.
Also, new orders for services rose at their fastest pace since April 2022, while new factory orders fell for the fifth month in a row. However, the pace of factory-order declines slowed sharply, suggesting a rebound could be just around the corner.
“A concern is that growth remains heavily reliant on the services economy, with manufacturing production declining at an increased rate,” Williamson said. “However, the promise of greater protectionism and tariffs has helped lift confidence in the U.S. goods-producing sector, which is already feeding through higher factory employment.”
Developments on the inflation front were also cause for optimism, according to S&P Global report, which noted that price pressures have continued to ease.
Average prices paid by businesses for inputs fell from 58.2 in October to 56.7 in November, while the index for prices charged by businesses declined to 50.8, the lowest reading since May 2020.
The further easing of inflationary pressures offers hope for further Federal Reserve interest-rate cuts, with lower rates generally boosting economic activity by way of increased lending.
