ISM non-manufacturing index drops to five-month low
Activity in the US services sector deteriorated more than expected in December, according to data released on Monday.
The Institute for Supply Management's services index fell to a five-month low of 57.6 from 60.7 in November, missing expectations for a reading of 59.0.
The non-manufacturing business activity index slipped to 59.9 from 65.2 in November, reflecting growth for the 113th consecutive month.
The new orders index printed at 62.7 in December from 62.5 the month before, while the employment index fell to 56.3 from 58.4. The prices index came 57.6 compared from 64.3 in November.
Respondents indicated that there is still concern about tariffs, despite the hold on increases by the US and China. Also, comments reflected that capacity constraints have lessened but employment-resource challenges remain.
"Respondents are mostly optimistic about overall business conditions," the ISM said.
Capital Economics said the drop in the services ISM was more modest than the already reported slump in the manufacturing index, but could still trigger renewed fears about the US economy given that it came in below the consensus forecast.
"Nevertheless, at 57.6, the non-manufacturing index is still at a level that has historically been consistent with GDP growth of close to 3% annualised so, for now at least, there are no signs of an imminent collapse in the economy."
Chief US economist Paul Ashworth said: "Overall, this is another release consistent with our long-held view that a shifting policy mix (fiscal stimulus fading, monetary policy getting tighter) would lead to a gradual slowdown in economic growth. A recession is possible, but probably not until very late this year or in early 2020."