Expansion in U.S. service industries slowed by more than expected in December to end the year on a weaker note as measures of business and employment fell, though new orders remained strong.
The Institute for Supply Management's nonmanufacturing index declined to 57.6, the lowest since July and below the median estimate of economists for 58.5, according to a report Monday. The drop was led by the biggest decline in more than a decade for a measure of supplier-delivery times, as well as a decrease in the gauge of business activity. New orders rose to a six-month high.
"Virtually everyone is expecting growth to slow this year, but how much and how far the slowdown takes us is still anyone's guess," said Chris Rupkey, chief financial economist at MUFG Union Bank in New York.
The main gauge decreased from 60.7 in November and covers sectors representing about 90 percent of the U.S. economy. Readings above 50 signal expansion. So even with the December decline, the index shows that service industries, where most Americans work, has been expanding for 107 consecutive months.
The inventories gauge fell by the most since 2016, indicating that stockpiles are still expanding but at a slower pace.
The drop follows a bigger plunge last week in the institutes's gauge of manufacturers, adding to reasons for some caution on the U.S. economic outlook even after robust figures on jobs and wages reported Friday. At the same time, the services index remains at a healthy level and the pickup in orders indicates demand is still solid.
There was little indication in the data of the trade war with China weighing on business: Export orders accelerated, while a measure of imports eased only slightly. Also, a gauge of prices fell to the lowest level in more than a year, possibly reflecting a tumble in oil and fuel costs.
The bottlenecks facing service companies are clearing up: A measure of backlogs fell to an 11-month low, and delays in supplier deliveries eased for a second month.
The employment gauge dropped for a third month while remaining at an elevated level. Friday's jobs data from the Labor Department showed private service providers added the most workers in December in more than a year.
The report showed that 16 service industries reported growth in December and only one -- mining -- reported a decline.
Information for this article was contributed by Katia Dmitrieva of Bloomberg News and by Martin Crutsinger of The Associated Press.
Business on 01/08/2019