A report released by the Institute for Supply Management on Monday showed U.S. service sector activity unexpectedly grew at an accelerated rate in the in the month of November.
The ISM said its services PMI climbed to 56.5 in November from 54.4 in October, with a reading above 50 indicating growth in the sector. The increase surprised economists, who had expected the index to dip to 53.1.
Andrew Hunter, Senior U.S. Economist at Capital Economics, said the services index is “consistent with the recent consumption data in pointing to decent activity growth in the fourth quarter.”
“But we suspect that resilience will fade next year, as higher interest rates start to take a bigger toll,” Hunter added.
The unexpected advance by the headline index partly reflected a significant acceleration in the pace of growth in business activity, with the business activity index surging to 64.7 in November from 55.7 in October.
The report also showed a turnaround by employment in the service sector, as the employment index rose to 51.5 in November from 49.1 in October.
On the other hand, the new orders index edged down to 56.0 in November from 56.5 in October, pointing to a slight slowdown in the pace of growth.
The prices index also dipped to 70.0 in November from 70.7 in October, suggesting prices increased by a modestly slower rate.
The ISM noted the prices index was near or below 70.0 for the fifth consecutive month following nine straight months of readings above 80.0, indicating movement toward equilibrium.
Last Thursday, the ISM released a separate report showing U.S. manufacturing activity contracted for the first time in over two years in the month of November.
The ISM said its manufacturing PMI slipped to 49.0 in November from 50.2 in October, with a reading below 50 indicating a contraction. Economists had expected the index to edge down to 49.8.
With the slightly bigger than expected decrease, the manufacturing PMI fell to its lowest level since hitting 43.5 in May of 2020.