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U.S. business activity growth eases to nine-month low

Staff Writer |
January survey data indicated a solid rise in U.S. service sector business activity, though the rate of growth eased for a third month running to reach a nine-month low.

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That said, new business continued to expand strongly, with the upturn accelerating to the fastest since last September.

Greater client demand was reflected in a faster rate of backlog accumulation.

The level of outstanding business increased at the joint-quickest pace since March 2015.

Meanwhile, inflationary pressures strengthened with both input cost and selling price inflation accelerating.

The seasonally adjusted final IHS Markit U.S. Services Business Activity Index registered 53.3 in January, down from 53.7 in December.

The latest index reading signalled a solid expansion in business activity among service providers, albeit the slowest since April 2017.

Anecdotal evidence linked the latest upturn to more favourable economic conditions.

Greater demand also drove the fastest rise in new orders since September 2017.

Where growth was reported, panellists linked this to the acquisition of new clients and higher sales spurred by increases in marketing activity.

Reflecting recent trends in output and new orders, the level of outstanding business at service sector firms increased for the ninth successive month in January.

Moreover, backlog accumulation accelerated to a rate that was the joint-sharpest since March 2015.

Meanwhile, job creation remained solid with firms increasing their workforce numbers in response to greater activity requirements.

The January data also indicated a further rise in input costs faced by service providers to the fastest since last September.

A number of survey respondents linked the latest increase to higher raw material costs, especially fuel.

Average prices charged also increased further in January, with the pace of inflation quickening.

Stronger client demand reportedly allowed firms to pass on greater cost burdens to customers through higher charges.

Overall, output price inflation was solid and above the series trend.