The Institute of Supply Management (ISM) has now released the December Non-Manufacturing Purchasing Managers' Index (PMI), also known as the ISM Services PMI. The headline Composite Index is at 55.0 percent, up 1.1 from 53.9 last month. Today's number came in above the Investing.com forecast of 54.5 percent.

Here is the report summary:

"The NMI® registered 55 percent, which is 1.1 percentage points higher than the November reading of 53.9 percent. This represents continued growth in the non-manufacturing sector, at a slightly faster rate. The Non-Manufacturing Business Activity Index rose to 57.2 percent, a 5.6-percentage point increase compared to the November reading of 51.6 percent, reflecting growth for the 125th consecutive month. The New Orders Index registered 54.9 percent, 2.2 percentage points lower than the reading of 57.1 percent in November. The Employment Index decreased 0.3 percentage point in December to 55.2 percent from the November reading of 55.5 percent. The Prices Index reading of 58.5 percent is the same as the November figure, indicating that prices increased in December for the 31st consecutive month. According to the NMI®, 11 non-manufacturing industries reported growth. The non-manufacturing sector had an uptick in growth in December. The respondents are positive about the potential resolution on tariffs. Capacity constraints have eased a bit; however, respondents continue to have difficulty with labor resources." [Source]

Unlike its much older kin, the ISM Manufacturing Series, there is relatively little history for ISM's Non-Manufacturing data, especially for the headline Composite Index, which dates from 2008. The chart below shows the Non-Manufacturing Composite. We have only a single recession to gauge is behavior as a business cycle indicator.

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The more interesting and useful subcomponent is the Non-Manufacturing Business Activity Index. The latest data point at 57.2 percent is up 5.6 from a seasonally adjusted 51.6 the previous month.

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For a diffusion index, this can be an extremely volatile indicator, hence the addition of a six-month moving average to help us visualize the short-term trends.

Theoretically, this indicator should become more useful as the time frame of its coverage expands. Manufacturing may be a more sensitive barometer than Non-Manufacturing activity, but we are increasingly a services-oriented economy, which explains our intention to keep this series on the radar.

Here is a table showing the trend in the underlying components.

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