Dominant US service sector revs up in December

As the 2019 holiday shopping season reached its peak, retailers reported strong activity. — Reuters pic
As the 2019 holiday shopping season reached its peak, retailers reported strong activity. — Reuters pic

WASHINGTON, Jan 8 — The all-important US services sector rebounded in December, underscoring steady economic activity as American companies hit a year-end rush, according to an industry survey released yesterday.

The bump in the Institute for Supply Management’s services index a drew a stark contrast with the manufacturing sector, which has been in recession for months and in December hit its weakest activity in a decade.

ISM said its non-manufacturing index rose 1.1 points to 55 per cent last month, surpassing economists’ expectations to rise to its highest level since August. Services is by far the largest segment of the US economy, and any reading of the ISM index above 50 indicates growth.

As the 2019 holiday shopping season reached its peak, retailers reported strong activity, while the entertainment, management and health care also saw healthy growth.

But education, real estate, wholesale trade and mining, an industry which includes the oil sector, reported slowing activity.

“We’ve seen many of our respondents saying they’re getting their year-end orders in,” ISM survey chair Anthony Nieves told reporters yesterday.

A spate of recent good economic news — including a truce in the US-China trade war, reassurance from the Federal Reserve that it will not raise interest rates and continued job creation — helped support the services sector, he said.

“As employment goes, that’s how this sector goes. All that good, positive news has been helping the consumer psyche.”

But the details of the survey showed the backlog of orders continued to shrink, but at a slower pace, while export orders grew, also at a slower pace, both of which could point to less robust expansion in the coming months.

Analysts at Oxford Economics said it expected “solid, albeit slower growth” in the service sector in early 2020.

“Cooler employment trends, continued cautious business investment and softer consumer spending momentum will lead to more modest domestic momentum in 2020,” the firm said in a commentary. — AFP

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