U.S. Services Index Unexpectedly Indicates Contraction In December
Activity in the U.S. service sector unexpectedly contracted for the first time in over two years in the month of December, according to a report released by the Institute for Supply Management on Friday.
The ISM said its services PMI tumbled to 49.6 in December from 56.5 in November, with a reading below 50 indicating a contraction. Economists had expected the index to edge down to 55.0.
With the much bigger than expected decrease, the index indicated a contraction for the first time since May 2020, when it hit 45.2.
The sharp drop by the headline index came as the new orders index plunged to 45.2 in December from 56.0 in November, which also indicated the first contraction since May 2020.
The business activity index also dove to 54.7 in December from 64.7 in November, suggesting continued growth in business activity, albeit at a slower rate.
The report said the employment index also dipped to 49.8 in December from 51.5 in November, while the prices index fell to 67.6 from 70.0.
On Wednesday, the ISM released a separate report showing U.S. manufacturing activity contracted at a slightly faster rate in the month of December.
The ISM said its manufacturing PMI edged down to 48.4 in December from 49.0 in November, with a reading below 50 indicating a contraction. Economists had expected the index to slip to 48.5.
Manufacturing activity contracted for the second consecutive month after expanding for 29 straight months, with the manufacturing PMI falling to its lowest level since hitting 43.5 in May 2020.
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