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The Services PMI for December came in at 54.1, easily beating street expectations of 53.5. The results were two points higher over Novembers data and the sixth straight month of expansion. Although only 9 industries reported growth for the month, down from 14 industries reporting growth last month.

“The Services PMI^® in December was boosted primarily by strength in the Business Activity and Supplier Deliveries indexes. Many industries noted that end-of-year and seasonal factors were helping drive business activity or impact inventory management. Some of the increased business activity seems to have been driven by preparation for demand in the new year, or risk management for impacts from ports strikes and potential tariffs. There was general optimism expressed across many industries, but tariff concerns elicited the most panelist comments.”

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Business activity (one of the most leading components of the index) jumped a solid 4.5 points in December, now at 58.2. With 10 industries reporting growth.

Comments from respondents include: “Receiving orders for next cycle earlier than usual” and “More activity around possible higher tariffs impacting the supply chain.”

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New orders increased 0.5 points, to 54.2, with 7 industries reporting growth.

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Employment dropped 0.1 points to 51.4, but remains in growth territory with 9 industries reporting growth.

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Prices paid increased sharply in December, up 6.2 points (to 64.4) with 15 of the 18 services industries reporting paying higher prices for their cost of services. This is one of those components that you’d like to see going lower. It confirms the inflation fight is far from over.

The services sector (think Health care, Technology, Financials, etc.) comprises roughly 2/3rd’s of today’s economy. Services continue to carry the US economy during the manufacturing slump, which is keeping us out of recession. December’s results were in line with an economy that is still growing in the 2% range.

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