US ISM Services Soars, Is the Economy Still Ramping?
US service sector activity strengthened in December and posted its fastest pace of expansion in more than a year, supported by solid demand and improving hiring. The ISM Services Index rose 1.8 points to 54.4—the highest since October 2024—and was well above the 50-point threshold that indicates expansion in the largest sector of the US economy. This figure also exceeded all estimates in economist surveys.
The strength came primarily from the demand side. The new orders component rose by the most since September 2024, while a measure of business activity also strengthened to its highest level in a year. Foreign demand also improved, as evidenced by export orders growing at the fastest pace in more than a year—leading the market to believe the US “services engine” is still running strong.
This increase in demand contributed to improvements in the services sector's job market. Employment indicators recorded their healthiest growth since February, ahead of the release of the government's jobs report on Friday, which is expected to show moderate payroll growth and a lower unemployment rate than the previous month.
Strikingly, this strong service sector performance contrasts with the still-struggling manufacturing sector. Separate ISM data earlier showed that US factory activity contracted by the most since 2024, confirming that the current US economic recovery is being driven more by services than industry.
On the inflation front, more encouraging news came from the services sector prices paid index, which grew at its slowest pace in nine months. Inventories also increased at the fastest pace since October 2024, but inventory sentiment fell for the third consecutive month—indicating that fewer businesses feel they have "too much inventory."
Source: Newsmaker.id
