The Institute for Supply Management (ISM) unveiled its latest findings on Tuesday, revealing an unanticipated rise in U.S. service sector activity for December. The services Purchasing Managers Index (PMI) surged to 54.1, up from November's 52.1, surpassing economist forecasts, which had pegged the increase at 53.3. It's important to note that any figure above 50 signals expansion in the sector.
The headline figure's upward momentum was significantly bolstered by a notable increase in the business activity index, which leaped to 58.2 in December from November's 53.7. Steve Miller, Chair of the ISM Services Business Survey Committee, commented, "The uptick in business activity appears largely driven by preparations for anticipated demand in the upcoming year, and as a precaution against disruptions from port strikes and potential tariffs." He further noted that optimism was widespread across various industries, though concerns about tariffs were a frequent topic among panelists.
Additionally, the report detailed marginal gains in the new orders index, rising to 54.2 from November's 53.7. Meanwhile, the employment index slightly reduced to 51.4 from 51.5, still indicating positive job growth in the service sector. The supplier deliveries index showed a significant increase, moving to 52.5 from a prior 49.5, suggesting lengthening delivery times.
On the inflationary front, the prices index experienced a noteworthy rise, reaching 64.4 in December from 58.2 in November. This marks the first time since January 2024 that the index has surpassed the 60-point threshold.
In a related development, the ISM released data the previous Friday indicating a slower contraction in U.S. manufacturing activity for December. The manufacturing PMI edged upward to 49.3 from November's 48.4, although it remains under the 50 mark, which delineates contraction. This unexpected increase took the manufacturing PMI to its highest level since recording 50.3 in March 2024.
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