U.S. Business Activity Picks Up in October as Manufacturing Emerges from Contraction

U.S. business output ticked higher in October as manufacturing sector pulled out of a contraction on increased new orders. Services activity also accelerated modestly.

U.S. Composite PMI rose to 51.0 in October, highest since July, suggesting economic momentum continuing into Q4.

Manufacturing PMI reached break-even level of 50, ending 5-month contraction. New orders rose for first time in 6 months.

Services PMI hit 3-month high of 50.9, defying forecasts of a slowdown. Cost inputs grew at slowest pace in 3 years.

Price gauge close to pre-pandemic average, suggesting headline inflation could drop near Fed's 2% target without contraction.

While recent data constructive for economic outlook, flare up in Middle East violence presents downside risk to growth and upside risk to inflation.