US Flash Service PMI Sees Small Miss

The miss in the US flash service PMI (57.0 vs 59.0 expected) weighed on the composite (56.5 in Nov after 57.6 in Oct). Some excerpts from the press release:

• The service business activity index dipped in October, but within it "firms signalled a sharp upturn in output" on greater travel and further easing of Covid-19 restrictions.
• New business rose solidly in November, although "the pace of increase slowed to be among the slowest since August 2020".
• "Pressure on capacity persisted amid labour shortages, with backlogs of work rising at the second-fastest pace on record. Firms sought to expand their workforce numbers, but employment growth was held back by challenges finding suitable candidates."
• More broadly, composite activity remains above the long-run pre-pandemic average but the latest dip "underscores how the economy is struggling to cope with ongoing supply constraints. Although supplier delivery delays eased to the lowest for six months, the lengthening of lead times remains far greater than anything seen prior to the pandemic".
• Inflationary pressures were again evident across both manufacturing and service sectors, as "input cost inflation spiked sharply higher in November to reach a new survey high".
• This increased pressure on firms to pass costs on to protect margins. "Although some resistance to higher prices was seen […], serving to dampen demand growth to the slowest for nearly a year, average prices charged for goods and services continued to rise at an unprecedented rate."
• Very little impact on short-dated Tsys or DXY.