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A popular gauge of economic growth retraced a brief downtrend and swung higher in October, suggesting the economic recovery is faring well despite a lack of renewed fiscal support.
IHS Markit's composite output index for the US climbed to 55.5 in October from 54.3, according to a Friday report. The reading is its highest level since February 2019. The firm's index of service-industry activity gained to 56 from 54.6, and its purchasing managers' index for the manufacturing industry improved to 53.3 from 53.2.
The gauges track month-over-month changes in activity, as opposed to overall output levels. Readings above 50 point to sector expansion, while those below 50 signal contraction.
Markit's indexes are among the few indicators showing a V-shaped rebound, but the trendline is largely fueled by the relative bounce-back in output. Other gauges of business activity show output remains well below pre-pandemic levels.
Optimism among service businesses improved to its strongest since April 2018, Markit said. Hiring slowed in the services and manufacturing industries due to softer pressures on capacity and some difficulties in finding suitable workers.
The Friday readings suggest the US economy "started the fourth quarter on a strong footing," Chris Williamson, chief business economist at IHS Markit, said in a statement. Services led the expansion by adapting to COVID-19 protocols, and manufacturing was boosted by robust household and business demand.
"A slowdown in hiring and weaker new order inflows were in part attributable to hesitancy in decision making ahead of the presidential election," Williamson added.
The encouraging uptrend still faces hurdles from rising COVID-19 cases throughout the nation. Public health experts expect winter months to drive case counts higher, sparking concerns of renewed lockdowns. The lack of near-term stimulus also threatens to curb hiring and consumer spending.
Still, others see the economy as able to continue its rebound without another spending package. New aid would be a "bonus," but the nation's rebound "is less dependent on fiscal stimulus than we originally believed," Seema Shah, chief strategist at Principal Global Investors, said Tuesday.
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