US service sector expansion eases in November, activity remains robust

US ISM non-manufacturing index dropped by 3.2 points to 55.9 in November. This is way below than what market consensus has forecast, which made the index to retreat to 58 this month.

This comes on the back of weak manufacturing report which came early in the week. The non-manufacturing index also disappointed, recording its largest decline since September 2013 on monthly basis.

Non-manufacturing sector is not fully immune to global obstacles, to be effected by the slowdown in mining and wholesale trade industries.

The slowing activity in the manufacturing and energy sectors will pressurize the consumer spending in states, which heavily rely on these industries, passing down to service industries. Most key sub-components, such as new orders, business activity and employment are well above the 50-points threshold, which separates contraction from expansion.

"The divergence in performance of two indexes illustrates the two-tracked nature of U.S. economic progress right now. Supported by robust domestic demand, most service sector industries continue to expand at a good clip", says Economics TD in a research note. 

But the headwinds that the economy is facing continue to support the case for a very gradual pace of interest rate normalization.