U.S. business activity ticks up in October, even without new stimulus

The stock market seems to have become addicted to stimulus. If the talks look fruitful, stocks rally. If Mnuchin or Pelosi throws water on stimulus talks, then the market sells off. Millions of people are running short on cash while very few job options are open, but the general state of businesses looks rather healthy.

IHS Markit reported that general business activity has increased to a 20-month high. Many prior economic reports over the past 45 days have signalled a slowing pace in the recovery. While IHS Markit did note a slower pace of growth in new orders, and some caution ahead of the November 3 election, the flash reading on its U.S. Composite PMI Output Index rose to 55.5 in October.

The Econoday consensus estimate expected a slight downtick to 54.2 in October, after the composite reading of 54.4 in September.

Within these readings, the Manufacturing Index ticked down to 53.3 after a 53.5 reading in September. The Services Index drove the gains, with a 56.0 reading after a 54.6 reading from September.

While some factors can weigh on the report, readings above 50.0 generally correspond with overall growth in private sector output. Though the indexes were above the 50 mark, there is still an underlying cautious tone to the business commentary so far in October. The overall index for new orders slipped to 53.8 in October, after a 54.6 reading in September.

This remains positive for the United States, but IHS Market Flash PMI data ahead of the U.S. data indicate that Europe and the United Kingdom are slowing. As for Europe, the indicators are signaling an increased risk of falling into a double-dip downturn as the second wave of coronavirus infections have hurt business activity in October. Readings in the United Kingdom showed that the economic recovery was losing momentum for a second successive month in October, and it fell to a four-month low.