The U.S. private sector activity posted its fastest pace of expansion in more than two and a half years in November, driven by exceptional growth in the services sector, which continues to far exceed even the most optimistic forecasts by economists.

Business sentiment indicators in both the services and manufacturing sectors, as measured by S&P Global’s Purchasing Managers’ Index (PMI), improved in November. The services sector recorded its strongest growth since March 2022, while manufacturing saw a slower pace of contraction.

US November S&P Global’s PMI Report: Key Highlights

The Flash Composite PMI rose from 54.1 in October to 55.3 in November, marking the strongest growth since April 2022.

The Flash Services PMI also soared from 55 to 57, surpassing estimates of 57.2 as tracked by TradingEconomics.

The Flash Manufacturing PMI inched up from 48.5 to 48.8, matching expectations.

Companies’ outlook for the year ahead rose to their highest levels since May 2022, fueled by optimism over potential interest rate cuts, stronger economic growth, and more favorable business policies anticipated by the new administration in 2025.

Employment declined for the fourth consecutive month, while output price inflation eased to its lowest level since June 2020.

While growth remained concentrated in the services sector, increased optimism and renewed hiring in manufacturing signaled the potential for a broader recovery in the months ahead.

“The rise in the headline flash PMI indicates that economic growth is accelerating in the fourth quarter, while at the same time inflationary pressures are cooling,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

According to Williamson, the survey’s price index for goods and services suggests that consumer inflation is running significantly below the Federal Reserve’s 2% target.

Williamson also highlighted the increasing optimism for next-year output from goods-producing businesses. “The promise of greater protectionism and tariffs has helped lift confidence in the U.S. good producing sector, which is already feeding through to higher factory employment,” he said.

Market reactions: Stocks rise, dollar holds at 2-year highs

A new round of strong economic data fueled a rally in U.S. stocks, particularly among those most sensitive to domestic economic momentum.

Small-cap stocks, tracked by the iShares Russell 2000 ETF ( IWM ) , rallied 1.2% on Friday, aiming for their fifth consecutive session of gains.

Blue-chip stocks also posted solid performances, with the Dow Jones, represented by the SPDR Dow Jones Industrial Average ETF ( DIA ) , climbing 0.5% and surpassing the 44,000 mark.

The U.S. dollar index (DXY), tracked via the Invesco DB USD Index Bullish Fund ETF , held steady with a 0.6% gain after touching fresh two-year highs earlier in the session.

Meanwhile, Treasury yields remained flat, and gold advanced 1.1%, also targeting its fifth straight session of gains.

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