The numbers: Most American businesses grew faster in November, buoyed by news of pending coronavirus vaccines and the end of a bitterly contested 2020 presidential election, a pair of surveys showed.
The IHS Markit PMI indexes for the service and manufacturing sides of the economy rose in November to a combined five-year high despite a record increase in coronavirus cases that threaten to retard the economic recovery.
News that a vaccine is on the way contributed to the surprisingly rosier picture. Uncertainty about the outcome of the presidential election also evaporated after a clear victory by Democrat Joe Biden.
The index is compiled from surveys of senior business executives.
“Expectations about the year ahead have surged to the most optimistic for over six years, reflecting the combination of a post-election lift to confidence and encouraging news that vaccines may allow a return to more normal business conditions in the not too distant future,” said Chris Williamson, chief business economist at IHS Markit.
What happened: The flash or preliminary index for services such as retail, technology and finance — the largest sector of the economy — rose to 57.7 in November from 56.0 in the prior month. That’s the biggest increase since March 2015.
The increase in the services index was somewhat surprising. Similar indexes in Europe fell in November, but Europe reimposed stricter lockdown rules than in the U.S.
The index for the smaller but still influential U.S. manufacturing sector climbed to 56.7 from 53.4, also a very strong reading.
In a big surprise, the Markit reports signaled a record rise in employment this month, possibly a signal that hiring for the holiday season has gotten underway.
Less welcome was a sharp increase in prices for raw materials or other materials, though the rise was largely tied to supply shortages that should ease once the global economy recovers.
Big picture: The U.S. economy was dealt another blow by a record increase in coronavirus cases in November, but if the IHS Markit surveys are spot on, most businesses are weathering the storm so far.
Some cities and states have imposed new restrictions, but nothing like the broad lockdowns that took place early in the pandemic. Service-oriented companies such as retailers, restaurants and travel-related businesses are ones most likely to suffer.
What they are saying? “With new infections still rising nationwide, December could be a different story,” said U.S. economist Michael Pearce of Capital Economics. “But the November PMIs suggest that economic activity is holding up well in the face of the third wave so far. “