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ISM Non-Manufacturing Index Falls to 55.3% In December

(Kitco News) – The U.S. service sector lost momentum for the second consecutive month as the the Institute for Supply Management said Wednesday that its headline non-manufacturing index fell slightly to 55.3% in December from 55.9% in November.

Consensus estimates, compiled by news organizations, called for the headline index to be somewhere around 56.0%. Despite the decline, the report points to continued growth in the non-manufacturing sector, although at a slower pace.

Readings above 50% in such diffusion indexes are seen as a sign of economic growth, and vice-versa. The farther an indicator is above or below 50%, the greater or smaller the rate of change.

Despite the headline weakness, the report noted increases in its component index. The new business index increased to 58.7%, from November’s reading of 58.2%, at the same time the new orders index increased to 58.2%, up from the previous report of 55.7% and the highly regarded employment index incresed to 55.7%, up from November’s reading of 55.5%.

Inflation pressues in the service sector remain subdued as the price index fell to 49.7%, down from November’s reading of 50.3%.

Royce Mendes, senior economist at CIBC World Markets, said the weaker than expected report continues to highlight growing risk to the U.S. economic growth.

“The weaker than expected ISM Non-Manufacturing number was another indicator that the economy is not firing on all cylinders,” he said. “Although a further deceleration would be cause for concern, we still see US growth coming in between 2 and 2.5% in 2016.”

By Neils Christensen of Kitco News;
Follow Neils Christensen @neils_C