Growth in the Services Sector Accelerated in November, ISM Says

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The U.S. economy appears to be picking up steam, defying the Federal Reserve’s efforts to cool things down.

On Monday, the Commerce Department reported factory orders in October that were stronger than expected, rising one percent compared with the prior month.

The Institute for Supply Management said its index of services sector activity rose to 56.5 in November, up from 54.4 in October. Economists had forecast the index to decline.

Readings above 50 indicate the sector is expanding.

The indicators suggest that the Fed may have to raise rates even higher than expected next year in order to bring down inflation.

“We are tightening the stance of policy in order to slow growth in aggregate demand,” Fed chairman Jerome Powell said in a speech last week. “Slowing demand growth should allow supply to catch up with demand and restore the balance that will yield stable prices over time. Restoring that balance is likely to require a sustained period of below-trend growth.”

The Business Activity Index registered 64.7 percent, a substantial increase of 9 percentage points compared to the reading of 55.7 percent in October. The measure of new orders, however, declined slightly. The barometer of prices was down seven tenths of a percentage point in November, to 70 percent.

“Based on comments from Business Survey Committee respondents, increased capacity and shorter lead times have resulted in a continued improvement in supply chain and logistics performance. A new fiscal period and the holiday season have contributed to stronger business activity and increased employment,” said

 

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