US services PMI grows at fastest pace since October 2015, pushing the Dow to fresh record highs
The rise in new business growth drove US services to expand at the fastest rate since October 2015, according to a closely watched measure of business activity, adding to the weight of data supporting the case for a rise in US interest rates and pushing the Dow Jones Industrial Average to fresh all-time intraday highs.
The US non-manufacturing purchasing managers’ index (PMI) rose to 57.2 per cent from 54.8 per cent, indicating that positive sentiment about the economy has increased, according to the compilers of the data, the Institute for Supply Management.
Meanwhile, a similar measure compiled by IHS Markit also recorded net positive sentiment, at 54.6 per cent – albeit after a small fall from last month’s steep rise. Any reading above 50 per cent indicates net positive sentiment.
Read more: US manufacturing PMI sees pre-Trump bounce
Incoming US President-elect Donald Trump has promised a huge programme of fiscal stimulus in the form of unfunded infrastructure spending, which has driven US indices to record highs. The Dow reached 19,274.85 in morning trading in the US.
“An above-expectations uptick in ISM non-manufacturing PMI for November suggests that the US services sector – which accounts for two-thirds of the country’s economic activity – has remained a robust proposition in the weeks since Donald Trump’s surprise election victory,” said Dennis de Jong, managing director at UFX.com.
The Federal Reserve’s Open Market Committee meets next week, with a strong consensus predicting that the central bank will raise interest rates. Federal Reserve chair Janet Yellen has said that a rise would come “relatively soon”, while other members of the committee said a rise was necessary to “preserve credibility”, according to minutes of their last meeting.
With markets pointing to an almost certain rate rise next Wednesday, attention is turning to how much the bank will tighten monetary policy at future meetings. Strong data across the board has raised expectations of a faster pace of tightening over the next year.
Chris Williamson, chief business economist at IHS Markit said: “The solid business survey readings not only add to the widely held view that the Fed is near certain to raise interest rates at its December meeting, but also raise the prospect of more aggressive than previously anticipated interest rate hikes in 2017.”