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ISM: Expansion Weakens in Economy's Service Sector

ISM: Expansion Weakens in Economy's Service Sector
(Dollar Photo Club)

By    |   Friday, 05 January 2018 12:48 PM

U.S. services industries are expected to expand in 2018, though perhaps not at a pace as fast as the 12-year high set in October, Anthony Nieves, chair of the Institute for Supply Management’s non-manufacturing business survey committee, said on Friday.

“You are still seeing growth,” Nieves said on a conference call with reporters after ISM released its non-manufacturing activity data for December earlier. “It may not be as strong as October.”

Earlier Friday, the ISM gauge on the vast U.S. services sector unexpectedly fell for a second straight month in December to 55.9 from 57.4 in November.

Analysts polled by Reuters had forecast a December reading of 57.6.

A reading above 50 suggests the services sector is expanding.

The ISM services index recorded a reading above 50 for 96 consecutive months, signaling the U.S. economy was growing at a 2.7 percent annualized pace.

Highlights of ISM Non-Manufacturing (December)

  • Non-manufacturing index fell to 55.9 (est. 57.6) from 57.4; readings above 50 indicate growth
  • New orders gauge dropped to 54.3, the lowest since August 2016, from 58.7
  • Employment measure advanced to 56.3 from 55.3
Key Takeaways

The unexpected slowdown in services, which represent almost 90 percent of the economy, is at odds with ISM manufacturing data this week showing factory managers the most upbeat in three months on stronger orders and output.

The decline in the gauge of service providers such as retailers and builders indicates growth is settling back to a more sustainable, yet still solid, pace. Last year, the ISM's services measure last year averaged 57, the second-strongest since 2005.

A gauge of inventory sentiment within the various non- manufacturing industries climbed to a five-month high in December, indicating more view their stockpiles as too high. That may help explain why order growth slowed.

Other Details

  • Business activity gauge, which parallels the ISM's factory production index, fell to 57.3 from November's 61.4
  • Order backlogs measure eased to 50 from 51.5
  • Prices-paid index was little changed at 60.8 after 60.7
  • Measure of inventory sentiment jumped to 62.5 from 56

(Newsmax wire services Bloomberg and Reuters contributed to this report).

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America's service industries expanded in December at the weakest pace in four months as orders cooled at companies that make up the bulk of the economy, a survey from the Institute for Supply Management showed Friday.
ism, expansion, weakens, economy, service, sector
Friday, 05 January 2018 12:48 PM
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