December data highlighted a sustained upturn in business activity and incoming new work across the U.S. service sector.
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Greater workloads and improved confidence towards the business outlook in turn contributed to the fastest rise in payroll numbers since September 2015.
However, the latest survey indicated that inflationary pressures pricked up again in December, with prices charged by service providers increasing at the steepest pace for one-and-a-half years.
At 53.9 in December, the seasonally adjusted Markit final U.S. Services Business Activity Index dropped from 54.6 in November to signal the slowest upturn in service sector activity for three months.
Nonetheless, the latest reading was well above the neutral 50.0 threshold and pointed to a solid pace of expansion. Moreover, the average reading during the final quarter of 2016 (54.4) was the strongest since Q4 2015.
Survey respondents noted that improving domestic economic conditions and greater consumer spending were factors supporting higher levels of business activity at the end of 2016.
Reflecting this, latest data indicated that growth of new work remained close to the 12-month peak seen in November. Increased volumes of new business contributed to renewed pressures on operating capacity, although the rate of backlog accumulation was only marginal in December.
Service providers reported a robust and accelerated upturn in payroll numbers at the end of the year. The rate of job creation was the fastest since late-2015, which survey respondents linked to ongoing expansion plans and rising confidence regarding the business outlook.
December data signalled a further rebound in business optimism from the post-crisis low seen in June, and the latest reading was one of the highest recorded since the summer of 2015.
Anecdotal evidence mainly cited expectations of a sustained domestic economic recovery over the course of 2017. Some firms also commented on hopes of a boost to business conditions following the presidential election. Meanwhile, input cost inflation accelerated in December and was the joint-fastest since July 2015.
Reports from survey respondents suggested that suppliers had passed on higher fuel and raw material prices. A number of firms also pointed to increased food costs.
Latest data indicated a solid rise in average prices charged by service providers and the rate of inflation was the steepest recorded since June 2015. ■