U.S. service sector activity accelerated in December, with the price index rising to its highest level in nearly two years
In December, U.S. service sector activity accelerated, with the non-manufacturing PMI rising from 52.1 in November to 54.1, exceeding market expectations. The input price index surged to a nearly two-year high, indicating rising inflation, consistent with the Federal Reserve's forecast of a smaller rate cut. Both the new orders and business activity indices increased, while the non-manufacturing price index reached its highest level since February 2023, and the employment index remained stable
According to the Zhitong Finance APP, the growth of the U.S. service industry accelerated in December last year, indicating stronger business activity, which pushed the price index to its highest level since the beginning of 2023. Data released by the Institute for Supply Management (ISM) on Tuesday showed that the service index rose by 2 points last month to 54.1. An index above 50 indicates economic expansion. Meanwhile, the prices paid index for services and raw materials surged over 6 points to 64.4.
Following the release of this data, the three major U.S. stock indexes plummeted, and the spot gold price briefly fell by $10, currently reported at $2,644 per ounce. The U.S. dollar index DXY saw a short-term increase of 30 points, currently reported at 108.52.
The accelerated rise in price indicators comes as the Federal Reserve adopts a more cautious approach to lowering interest rates. The resilience of demand is reflected in the increase in business activity and new orders, raising concerns that inflation may remain stubbornly persistent. ISM data showed that the new orders index rose by 0.5 points to 54.2, consistent with the average level for 2024. Additionally, the business activity index increased by 4.5 points to a three-month high, indicating that the U.S. economy remains robust at the end of the fourth quarter.
Meanwhile, the ISM services employment index remained essentially unchanged at 51.4. This suggests that businesses are satisfied with their current staffing levels and believe they can meet current demand.
The growth of the service industry stands in stark contrast to the weakness in manufacturing. Last week, the ISM manufacturing index showed that manufacturing activity contracted for the ninth consecutive month in December. Manufacturers face challenges including a strong dollar, potential tariffs, and uncertainties surrounding dockworker contract negotiations, which are scheduled to resume on Tuesday