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US private sector posts strongest output growth since April 2019

Business activity across the U.S. private sector expanded in December 2019 at its fastest pace in eight months amid stronger growth in the services sector, according to latest survey data from IHS Markit.

The seasonally adjusted IHS Markit U.S. Composite PMI Output Index registered a final reading of 52.7 for December 2019, up from 52.0 in the previous month. The index recorded its highest reading since April 2019, and was better than the flash estimate for December and the consensus forecast of economists polled by Econoday, which called for an index reading of 52.2.

The composite index is a weighted average of manufacturing output and business activity in the services sector. An index reading above 50 indicates an overall increase.

The final Services PMI Business Activity Index rose month over month in December 2019 to 52.8 from 51.6, marking the sharpest pace of growth since July 2019. Stronger client demand drove the fastest rise in new orders in the services sector since July 2019, IHS Markit said, while export orders continued to improve, although the rate of expansion remained slower than the series trend.

Business expectations for the year ahead in the services sector also improved in December 2019 as companies remained bullish on new sales prospects, IHS Markit said. However, confidence levels were below those seen at the end of 2018, with some businesses being worried about the stability of client demand.

In the wider private sector, output expectations remained "historically subdued" due to uncertainty about future client demand, according to IHS Markit.

"The missing ingredient compared to this time last year is optimism about the future, with business sentiment regarding prospects for the next twelve months running well below levels seen this time last year, and close to the lowest for at least seven years," said Chris Williamson, chief business economist at IHS Markit.