US factory and service sector growth picks-up in October, IHS Markit says

Activity in America's manufacturing and services sectors picked-up noticeably in October, supporting the case for further policy tightening by the US central bank, economists said.

IHS Markit's composite output index for the US factory and services sector rose from a reading from a 53.9 last month to 54.8 in October, notching up a three-month high in the process.

Growth was quickest on the manufacturing side of the economy, where the corresponding Purchasing Managers' Index jumped from 55.6 to 55.9, its best level in five months.

Economists had penciled-in a reading of 55.5.

The services PMI meanwhile rose from 53.5 to 54.7.

Higher levels of business activity meanwhile were supported by a further sharp increase in new work, mainly on the domestic side, putting additional pressure on operating capacity.

Payroll growth remained "solid", IHS Markit said, but private sector job creation was at its slowest since June 2017.

Commenting on Wednesday's readings, Chris Williamson said the headline PMI was consistent with an annualised rate of growth of 2.5% in gross domestic product.

However, the figures also showed that the economy was being held back by a lack of spare capacity even as tariffs dampened export growth.

On the prices front, average charges for goods climbed at one of the steepest rates seen over the past seven years, while those for services revealed the second-largest increase since the global financial crisis.

"The resilience of the domestic economy in the face of trade worries, and the strong price pressures indicated by the survey data, will add to expectations that the Fed will hike rates again before the end of the year."

According to the CME's Fed Watch tool, Fed funds futures were pricing-in a roughly 77.5% chance of another 25 basis point hike in short-term interest rates.