US services activity cools to 57.9 in October, just shy of forecasts

The blended composite output measure, which tracks both sectors together, slipped to 57.6 from 58.4 a month earlier. Factory activity surprised to the upside at 56.0, above the 55.5 forecast, though still down from September’s 57.0.

Prices charged by businesses climbed at the quickest clip since August 2022, and incoming new business reached its best level in more than four and a half years. Companies’ outlook for output over the coming year softened a touch from September but still ranked as the second-strongest reading of 2026.

S&P Global Market Intelligence’s lead economist, Chris Williamson, remarked that the early October figures show the US economy still expanding at a robust pace as the fourth quarter gets underway, with the survey’s output signals pointing to annualized GDP growth near 5% following an estimated 4% pace in Q3. He noted that aside from the pandemic-recovery rebound, the past several months represent the strongest run for US firms since early 2015.

Williamson also pointed to ongoing cost pressures, explaining that a fresh climb in oil prices, tighter supply networks and swelling order backlogs were giving companies more room to pass on higher costs, driving selling-price inflation to its fastest pace in over four years and hinting that consumer inflation could push further past the Federal Reserve’s goal.

Last month’s data had been interpreted by traders as a hawkish signal, with hiring at its briskest since June 2022 and input costs at their highest since October 2022; the October figures show some pullback from those peaks.

Why it matters: A reading that remains elevated alongside quickening selling-price inflation could keep alive expectations that the Fed will hold off on rate cuts, a dynamic that tends to bolster the dollar and keep Treasury yields elevated. That said, the softer growth signal compared with September may dial back some of that hawkish repricing.

Source: investingLive