The U.S. services sector has continued its expansion, reaching its highest level since mid-2022. The ISM services purchasing managers' index (PMI) rose from 54.9 in September to 56.0 in October 2024, indicating robust growth in business activity. This increase is significant as it correlates with an estimated 2.3% annualized GDP growth. Notably, the employment index also saw a rise, jumping from 48.1 to 53.0, marking the highest level since August 2023. However, the business activity index declined from 59.9 to 57.2, and the new orders index fell from 59.9 to 57.4, suggesting some caution among businesses despite overall growth. The supplier delivery index improved from 49.6 to 52.1, indicating a recovery in supply chain issues. The prices index has now grown for 89 consecutive months, reflecting ongoing inflationary pressures in the economy. [b41f5eac]
In contrast, the manufacturing sector continues to struggle, with its PMI at 46.5, marking seven consecutive months of contraction. This widening gap of 9.5 points between the services and manufacturing PMIs highlights the divergent paths of these sectors. Various industries have reported challenges, including impacts from hurricanes and port strikes, which have affected operations and supply chains. [b41f5eac]
The UK’s services sector has also shown resilience, expanding at its fastest pace in eight months, with the S&P Global UK Services PMI rising to 54.3 in January, up from 53.4 in December. This growth contrasts sharply with France, where the private sector has slipped into contraction, with the HCOB composite output index falling to 47.4 in September 2024. The decline in France is attributed to a significant drop in manufacturing output and a decrease in customer numbers following the Olympics. [29f3a82e]
Germany's services sector is facing challenges as well, with its PMI reaching a five-month low. The contrasting performances of the UK, France, Germany, and the U.S. highlight the diverging economic trajectories across these regions. While the UK's services sector is expanding, France and Germany are grappling with economic difficulties, which could have implications for the overall performance of the eurozone.
Research from Allianz Trade indicates that about 15% of small and medium-sized enterprises in the UK are at risk of defaulting on their debts over the next four years, higher than France at 14%, Italy at 9%, and Germany at 7%. Allianz Trade predicts that more than 7,000 firms will go bankrupt in the UK in 2024. The UK slipped into a recession at the end of last year, and Prime Minister Rishi Sunak is under pressure to boost growth. However, with inflation above target and interest rates at their highest since 2008, businesses are feeling the strain. Allianz Trade warns of a rise in global business insolvencies, with a 9% increase expected this year and the largest spikes predicted in the US, Spain, and the Netherlands in 2024. [341bf265]