The shift back to spending on services continued to accelerate in November as the headline purchasing managers’ index for services reached an all-time high, according to data released by the Institute of Supply Management on Friday.
The headline index rose to 69.1 on the month from 66.7, the third increase in a row, indicating a faster expansion of the service sector. A reading above 49.2 suggests overall expansion.
The main drivers were business activities and new orders, which both advanced significantly in November, as demand for services continued to recover from the depths of the pandemic.
Another bright spot came from the employment subindex, which registered at 56.5—4.9 percentage points higher than the prior month—showing a sharp improvement in labor shortage issues.
We continued to see signs of supply chain problems easing as the subindex for the backlog of orders declined to 65.9 from 67.3, while the inventory change subindex surged to 48.2 from 42.2.
Inflationary pressures remained elevated as the prices paid subindex registered at 82.3 on the month, a slightly slower rate compared to October’s reading of 82.9.
The strong rebound of the service sector in November beat earlier market expectations for a decline. But a major risk in the coming months will be the complication around the new variant—omicron—which will most likely lead to more concerns than reliefs for the sector.