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Service sector in U.S. expands at fastest pace since November 2015

Staff Writer |
January data signalled a positive start to 2017 for the U.S. service sector.

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The latest survey revealed a robust expansion of business activity and another strong increase in incoming new work. Meanwhile, service providers were more upbeat about the business outlook than at any time since May 2015.

Inflationary pressures eased since December, but were still among the highest seen over the past year-and-a-half. Adjusted for seasonal influences, the Markit Flash U.S. Services PMI Business Activity Index1 picked up to 55.1 in January, from 53.9 in December, which marked 11 months of sustained expansion.

The latest reading also pointed to the fastest rate of business activity growth since November 2015. Anecdotal evidence suggested that stronger domestic demand and improving business confidence had led to a robust rise in service sector activity at the start of 2017.

Volumes of new work increased at a sharp and accelerated pace in January. The latest upturn in new business was one of the strongest since late- 2015. Survey respondents commented on successful product launches, new marketing initiatives and generally improving client demand.

A robust pace of new business growth contributed to sustained pressure on operating capacity in January, although the rate of backlog accumulation remained only marginal.

Improving demand patterns encouraged additional job creation across the service economy at the start of the year. The latest survey indicated a solid upturn in payroll numbers, although the rate of growth moderated from December’s 15-month peak.

Stronger business confidence also underpinned the rise in employment levels during January. Service providers indicated that growth expectations for the next 12 months were the greatest since May 2015.

Anecdotal evidence mainly cited expectations of improving domestic economic conditions.