US services activity contracted for the first time in more than two-and-a-half years in December amid weakening demand, while the pace of increases in prices paid by businesses slowed considerably, providing further evidence that inflation was easing.
The Institute of Supply Management said on Friday (6) that its non-manufacturing PMI fell from 56.5 in November to 49.6 last month. It was the first time since May 2020 that the Services PMI has dipped below the threshold of 50 that indicates contraction in the sector, which accounts for more than two-thirds of US economic activity.
Barring the period of the Covid-19 pandemic, this was the weakest Services PMI reading since late 2009. The index is now also below the 50.1 level, which the ISM says is consistent over time with a recession in the economy in general.
Economists polled by Reuters had projected a decline to 55.0.
Weakness in the services sector followed another ISM survey this week, showing output falling for a second straight month in December.
The Federal Reserve’s fastest rate-raising cycle since the 1980s to fight inflation is dampening demand across the economy, although the job market remains resilient.
The ISM indicator of new orders received by service companies fell to 45.2 from 56.0 in November.
The measure of prices paid by service providers for inputs fell to 67.6, the lowest level since January 2021, from 70.0 in November, as supply bottlenecks continued to ease.
Source: CNN Brasil
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