The US services sector has demonstrated an expansion, surpassing expectations in the previous month as business activity gained momentum. The data from the Institute for Supply Management illustrates that the purchasing managers' index (PMI) escalated to 54.1 in December, an increase from 52.1 in November.
This performance exceeded the anticipated consensus of 53.5, according to a Bloomberg survey. A reading above 50 is indicative of a generally expanding services sector economy. The December PMI reading ranks as the third highest of 2024 and was particularly influenced by the heightened indices of business activity and supplier deliveries, as noted by Steve Miller, chair of the ISM's services business survey committee.
Notably, nine service industries reported growth in December, which reflects a decrease of five industries compared to November's figures. Miller stated, "Many industries noted that end-of-year and seasonal factors were helping drive business activity or impact inventory management." He also pointed out that part of the uptick in business activities appeared to be directly associated with preparations for anticipated demand in the new year, as well as risk management strategies responding to port strikes and the potential for tariffs.
Panelist comments conveyed a blend of optimism alongside apprehensions regarding tariffs. In light of the impending administration led by President-elect Donald Trump, who has pledged to implement comprehensive tariffs aimed notably at Canada, Mexico, and China, such concerns are heightened. Additionally, the ISM's business activity index surged significantly by 4.5 points to reach 58.2 last month, whereas new orders saw a modest increase to 54.2 from a previous 53.7.
However, the employment index experienced a slight decline of 0.1 point, settling at 51.4 for December, as per the ISM survey results. The improved PMI in the services sector is a positive signal amid a landscape where various other economic indicators have shown signs of slowing down. Jefferies US Economist Thomas Simons remarked on this improvement, indicating that it is "encouraging at a time when many other data series have begun to falter." Moreover, the prices paid index surged to its highest level since September 2023, a situation that Simons regards as unfavorable news for the Federal Reserve; nevertheless, it aligns with an overall strong pace of activity within the sector.
Supporting this narrative, data from S&P Global ($SPGI) revealed that the services industry achieved a 33-month high last month. Price: 493.01, Change: -1.18, Percent Change: -0.24..