Manufacturing, service PMIs bounce back in October despite cost complaints

BloombergEmployees prepare fabric for clothing at the 9B Apparel manufacturing facility in Los Angeles.

The numbers: The flash reading of IHS Markit's manufacturing purchasing managers index rose to a five-month high of 55.9 in October from 55.6, while the flash services PMI rose to a two-month high of 54.7 from 53.5 in September.

Any reading above 50 indicates improving conditions. A flash reading is composed of 85% to 90% of the total.

What happened: The U.S. economy stepped up a notch in October after hurricane disruption last month. Improving domestic economic conditions were the main factor behind rising client demand, IHS Markit said.

However, managers complained about higher cost burdens and stretched domestic supply chains in the wake of trade tariffs, the group said.

The big picture: Corporate America is starting to sound concerned about factors including dollar strength and tariffs, as evidenced by pessimism coming from Caterpillar CAT, +2.93% , 3M MMM, +0.24% and Texas Instruments TXN, -0.26% .

The concern isn't just in the U.S. - the flash eurozone manufacturing PMI slowed to a 26-month low and the flash services PMI slowed to a 24-month low.

What they're saying: "The resilience of the domestic economy in the face of trade worries, and the strong price pressures indicated by the survey data, will add to expectations that the Fed will hike rates again before the end of the year," said Chris Williamson, chief business economist at IHS Markit.

Market reaction: The Dow Jones Industrial Average DJIA, +1.63% was listless in early action on Wednesday.