Although retail gained, economic activity in the services sector contracted in December after 30 consecutive months of growth as the Institute for Supply Management Services Purchasing Managers Index registered 49.6%.
The latest ISM Report on Business, issued by Anthony Nieves, chair of the ISM Services Business Survey Committee, noted that the index fell 6.9 percentage points from November’s reading of 56.5%.
“The composite index contracted for the first time since May 2020, when it registered 45.2%,” Nieves stated. “The Business Activity Index registered 54.7%, a substantial, 10 percentage point decrease compared to the reading of 64.7% in November. The New Orders Index contracted in December for the first time since May 2020: The figure of 45.2% is 10.8 percentage points lower than the November reading of 56%. Supplier Deliveries contracted in December, indicating faster performance. The index registered 48.5%, 5.3 percentage points lower than the 53.8% reported in November.”
Supplier Deliveries is the only ISM Report On Business index that is inversed, with a reading of above 50% suggesting slower deliveries, which is typical as the economy improves and customer demand increases.
Nieves added, “The Prices Index was down 2.4 percentage points in December, to 67.6%. The Inventories Index contracted for the seventh consecutive month: the reading of 45.1% is down 2.8 percentage points from November’s figure of 47.9%. The Inventory Sentiment Index, 55.9%, up 11.7 percentage points from November’s reading of 44.2%, returned to expansion after four straight months in contraction. Business Survey Committee respondents indicated that supplier deliveries were faster in December, based on increased capacity and improved logistics. Employment contracted due to a combination of decreased hiring due to economic uncertainty and an inability to backfill open positions. The holiday season contributed to the continued growth in business activity, albeit at a slower rate.”
The 11 services industries reporting gains in December listed in order of growth were Retail Trade; Health Care & Social Assistance; Utilities; Public Administration; Arts, Entertainment & Recreation; Mining; Accommodation & Food Services; Transportation & Warehousing; Management of Companies & Support Services; Professional, Scientific & Technical Services, and Finance & Insurance. The six services industries reporting December were: Real Estate, Rental & Leasing; Wholesale Trade; Other Services; Information; Construction, and Educational Services.
