ISM: Service sector expanded in December

The ISM Services index decreased 2.1 percentage points (pp) to 50.6%—the 12th consecutive month of expansion for the services sector.

“Nine industries reported growth in December. The Services PMI®, by being above 50 percent for the 12th month after a single month of contraction and a prior 30-month period of expansion, continues to indicate sustained growth for the sector, though at a slower rate in December,” said Anthony Nieves, Chair of the ISM Services Business Survey Committee.

The Business Activity Index increased 1.5 pp to 56.6% in November. The Supplier Deliveries Index indicated faster performance for the third consecutive month in December, registering 49.5%, down 0.1 pp from November. The index has been in “faster” territory in 11 of the last 13 months. The Prices Index decreased 0.9 pp to 57.4%. Respondents commented: “We have seen a typical slow seasonal change in business. This is not unexpected and remains at a higher level than in the previous two years,” (Transportation & Warehousing) and “Final push for the holidays, the supply chain and sales are strong—pricing stable.” (Retail Trade)

The Inventories Index contracted in December, registering 49.6%, a decrease of 5.8 pp, and the Employment index registered 43.4%, down 7.4 pp from November. Respondents commented that, “Revenues remain strong but labor is still constrained, and suppliers are floating price increases beginning January 1, which will likely further reduce already low operating margins” (Health Care & Social Assistance) and “Companies are taking a wait-and-see approach to increasing labor costs as they continue to try to do more work with less people.” (Professional, Scientific & Technical Services)

The Inventory Sentiment Index expanded for the eighth consecutive month in December after one month of contraction in April, preceded by four consecutive months of growth and four months of contraction from August to November 2022. The index decreased 6.9 pp to 55.3%, indicating that respondents feel their inventories are too high when correlated to business activity levels.

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