LIVE MARKETS-Friday data: Business activity expands, consumer sentiment wallows below COVID-era levels

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FRIDAY DATA: BUSINESS ACTIVITY EXPANDS, CONSUMER SENTIMENT WALLOWS BELOW COVID-ERA LEVELS

A data double-header showed that business activity is expanding but confirmed that the mood of the consumer is fairly downbeat this month.

Activity at U.S. businesses has gained some steam this month.

S&P Global's advance "Flash" November purchasing managers' indexes (PMI) showed the manufacturing side USMPMP=ECI losing some momentum, shedding 0.6 point to 51.9.

It's a minimal deceleration that was offset by a small gain in the larger services sector USMPSP=ECI which added 0.2 points to land at a clean 55.0, stronger than the 54.6 analysts expected.

Taken together, the composite measure USPMCF=ECI added 0.2 pts to 54.8. That's comfortably north of 50, the PMI dividing line between contraction and expansion.

"The flash PMI data point to a relatively buoyant U.S. economy in November," writes Chris Williamson, S&P Global's chief business economist.

But not quite everything is coming up roses.

"Although jobs continued to be created in November, the rate of hiring continues to be constrained by worries over costs, in turn linked to tariffs," Williamson adds. "Both input costs and selling prices rose at increased rates in November, which will be of concern to the inflation hawks."

Separately, the University of Michigan's (UMich) second and final take on November consumer sentiment USUMSF=ECI was upgraded modestly, gaining 0.7 point to land at an even 51.0.

Survey participants' assessment of present conditions was downwardly revised by 1.2 points, remaining at its lowest level in the survey's history. But near-term expectations improved, rising 0.2 point to 51.0.

"Consumers remain frustrated about the persistence of high prices and weakening incomes" says Joanne Hsu, UMich's director of consumer surveys. "This month, current personal finances and buying conditions for durables both plunged more than 10%."

The graphic below shows the consumer outlook continues to wallow well below the post-COVID plunge.

On the bright side, the closely scrutinized inflation expectations element was downwardly revised from UMich's preliminary initial November reading.

Respondents now expect annual price growth of 4.5% a year from now, 1.5 percentage points hotter than the most recent core CPI reading.

Longer-term, consumers expect annual inflation of 3.4% five years from now, 20 basis points cooler than UMich's first stab at the data.

While consumer inflation expectations are not accurate predictors of hard inflation numbers, the data shows that concerns about the inflationary effects of tariffs are still very much on consumers' minds.

(Stephen Culp)

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