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U.S. service sector continues to rise

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Staff writer |
U.S. service sectorActivity at service providers in the U.S. continued to rise at a solid pace in December. This was signalled by the final Markit U.S. Services PMI Business Activity Index posting 55.7, down slightly from November's 55.9 and below the earlier flash reading of 56.0.

The services reading nudged the Markit U.S. Composite PMI Output Index (covering manufacturing and services) down slightly to 56.1 in December, from 56.2 in November. Nevertheless, the index signalled a solid increase in activity across the manufacturing and service sectors combined.

Service companies were optimistic towards the one-year business outlook, with almost 59% of surveyed firms expecting activity to be higher. Planned new product launches and improving economic conditions were expected to support future growth. Overall, the level of positive sentiment was marked and sharply higher than November's 12-month low.

The volume of new business received by service providers rose at a steep and accelerated pace in December. The latest increase in new orders was the joint-strongest since April 2012. Similarly, new work intakes at manufacturers also increased strongly over the month. As a result, total new business rose at the fastest rate for 20 months.

Concurrently, total backlogs of work at both manufacturing and service companies rose for the second month running in December. That said, the rate of growth eased from November's record pace. December PMI data indicated that services employment rose strongly and at one of the fastest rates in the four-year series history. Job creation in the manufacturing sector also strengthened, reaching a nine-month high.

Overall, employment across both sectors grew at the joint-strongest pace since data collection began in October 2009, on par with that seen in March 2011. Meanwhile, the rate of input price inflation across the combined manufacturing and service sectors was unchanged from November. Service providers commonly cited higher packaging costs, while manufacturers reported an increase in raw material prices, particularly for metals and wood.

Firms passed on part of the increase in costs to clients by raising their selling prices in December. By sector, manufacturing factory gate prices rose at the strongest pace in 28 months, but this was offset by a weaker increase in services output charges.

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