U.S. ISM Services PMI Falls to a Seven-Month Low in December
Summary
- 50.6 in Dec. vs. 52.7 in Nov.
- Indexes for Employment (43.3, lowest since July ’20), New Orders (52.8, a three-month low), and Supplier Deliveries (49.5) fall in Dec., while Business Activity Index rises (56.6, a three-month high).
- Prices Index eases to a five-month-low 57.4, albeit remaining above 50 since June ’17.
The U.S. ISM Services PMI fell to 50.6 in December after rising to 52.7 in November, according to today’s report by the Institute for Supply Management, indicating expansion for the 12th consecutive month but at the slowest pace since May 2023. The December reading, the third m/m fall in four months, was up from a low of 49.2 in December 2022 but down from a peak of 67.6 in November 2021. The 12-month average was 52.8, reflecting strong growth in the U.S. services sector. The Action Economics Forecast Survey had expected 52.6 for December.
Haver Analytics constructs a composite index combining the services index and the manufacturing reading. This index fell to 50.2 in December after increasing to 51.9 in November, showing expansion for the seventh straight month but at the slowest rate since May 2023. These readings were up from a contraction-level 49.1 in December 2022 but down from a record 66.8 in November 2021. These series date back to July 1997.
In the latest services survey, the business activity index rose to 56.6 in December, the fourth m/m rise in five months, from 55.1 in November, indicating business activity expanded for the 43rd successive month at the fastest pace in three months. The index was slightly above 53.5 in December 2022 but below a record 70.4 in November 2021. An increased 25.3% of respondents (NSA) reported higher activity in December while 18.0% reported an activity decline.
Meanwhile, the employment index dropped to a contraction-level 43.3 in December, the third m/m decline in four months, after rising to 50.7 in November, showing employment activity in the services sector contracted for the first time since May 2023 to the lowest level since July 2020. The latest reading was lower than 49.4 in December 2022. A lessened 9.6% of respondents (NSA) indicated higher employment in December while an increased 23.2% reported a decline. The new orders index fell to 52.8 in December, the first m/m fall since September, after registering at 55.5 in November and October, indicating expansion in new orders for the 12th consecutive month but at the slowest pace in three months. The index was up from a low of 45.2 in December 2022 but down from a record 69.2 in October 2021. A lessened 19.1% of respondents (NSA) reported higher orders in December while an increased 19.5% reported a decline.
The supplier deliveries index (NSA) dipped to 49.5 in December after increasing to 49.6 in November, remaining below 50 for the third straight month. The index was up from a low of 45.8 in March 2023 and 48.5 in December 2022 but well below a high of 75.7 in November 2021. A 7.0% of respondents (NSA) reported faster delivery speeds in December while a lessened 6.0% reported slower speeds.
On the inflation front, the prices index fell to 57.4 in December from 58.3 in November, indicating prices paid by services organizations for materials and services had risen (i.e., above 50) since June 2017 but at the slowest rate of increase since July 2023. The latest reading was up from a low of 54.1 in June 2023 but meaningfully below 68.1 in December 2022 and a record 84.5 in December 2021. A 15.8% of respondents (NSA) reported price rises in December while 9.6% reported price decreases.
Additionally, the new export orders index dropped to 50.4 in December after rising to 53.6 in November, indicating new export orders expanded for the eighth time in nine months but at a slightly slower rate. The inventory change index fell back to 49.6 in December from 55.4 in November, indicating inventories contracted for the second time in three months. The inventory sentiment index declined to 55.3 in December after jumping to 62.2 in November, showing expansion for the eighth successive month but at a slower pace. The imports index decreased to 49.3 in December after falling to 53.7 in November, registering the first contraction since March 2023. The backlog of orders index increased marginally to 49.4 in December after declining to 49.1 in November, showing contraction for the fourth time in five months. These series are not seasonally adjusted and not included in the ISM Services PMI total.
The ISM Services PMI is a composite index consisting four equally weighted diffusion indexes (25% each): Business Activity, New Orders, Employment, and Supplier Deliveries. A reading above 50 indicates expansion in the services sector; below 50 suggests contraction. Supplier Deliveries is the only ISM index that is inversed; a reading above 50 indicates slower deliveries. The ISM figures are available in Haver’s USECON database, with additional detail in the SURVEYS database. The expectations figure from Action Economics is in the AS1REPNA database.
Winnie Tapasanun
AuthorMore in Author Profile »Winnie Tapasanun has been working for Haver Analytics since 2013. She has ~20 years of working in the financial services industry. As Vice President and Economic Analyst at Globicus International, Inc., a New York-based company specializing in macroeconomics and financial markets, Winnie oversaw the company’s business operations, managed financial and economic data, and wrote daily reports on macroeconomics and financial markets. Prior to working at Globicus, she was Investment Promotion Officer at the New York Office of the Thailand Board of Investment (BOI) where she wrote monthly reports on the U.S. economic outlook, wrote reports on the outlook of key U.S. industries, and assisted investors on doing business and investment in Thailand. Prior to joining the BOI, she was Adjunct Professor teaching International Political Economy/International Relations at the City College of New York. Prior to her teaching experience at the CCNY, Winnie successfully completed internships at the United Nations. Winnie holds an MA Degree from Long Island University, New York. She also did graduate studies at Columbia University in the City of New York and doctoral requirements at the Graduate Center of the City University of New York. Her areas of specialization are international political economy, macroeconomics, financial markets, political economy, international relations, and business development/business strategy. Her regional specialization includes, but not limited to, Southeast Asia and East Asia. Winnie is bilingual in English and Thai with competency in French. She loves to travel (~30 countries) to better understand each country’s unique economy, fascinating culture and people as well as the global economy as a whole.
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