ISM: Service sector contracts in December

The ISM Services Index registered 49.6%; 6.9 percentage points lower than November’s reading of 56.5%. The composite index contracted for the first time since May 2020, when it registered 45.2 percent.

11 industries reported growth. The composite index ended a 30-month period of growth, contracting for the first time since two straight months of sub-50 percent readings in April and May 2020. Of the four subindexes that directly factor into the Services PMI®, three — New Orders, Employment and Supplier Deliveries — contracted in December. Prior to the current contraction in the services sector, the PMI® indicated growth for all but two of the previous 154 months, including a faster rate of expansion in November.”

The Business Activity Index registered 54.7%; 10 percentage point decrease compared to the reading of 64.7 percent in November.

Employment Index registered 49.8%, down 1.7 percentage points from the November reading of 51.5%. Five industries reported growth in employment for the month.

New Orders Index registered 45.2 percent, down a notable 10.8 percentage points from the November reading of 56 percent. New orders contracted after 30 consecutive months of growth. Comments from respondents include: “High interest rates for mortgages have slowed sales dramatically” and “Orders from customers are softening, and some orders are being canceled.”

The Supplier Deliveries Index registered 48.5 percent, down 5.3 percentage points from the 53.8 percent recorded in November. A reading above 50 percent indicates slower deliveries, while a reading below 50 percent indicates faster deliveries.

Read the ISM release.