- Prelim was 51.3
- Prior was 50.8
- Composite PMI vs 51.0 prelim (50.7 prior)
- New orders rose at the sharpest rate since June
- Service providers recorded a steeper rise in input costs as higher wages and food prices drove inflation but there was a slower uptick in output charges
The final reading is rarely a surprise but it sets up the ISM services report, which normally comes 15 minutes later but due to calendar quirks comes tomorrow. It's expected at 52.6 from 52.7 in November.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said:
"Some New Year cheer is provided by the PMI signalling an acceleration of growth in the vast services economy, which reported its largest rise in output for five months in December. The improvement overshadows a downturn recorded in manufacturing to indicate that the overall pace of US economic growth likely accelerated slightly at the end of the year.
"Some support to financial services in particular is coming from the recent loosening of financial conditions amid growing hopes of interest rate cuts in 2024. Growth nevertheless remains subdued by standards seen over the spring and summer, with the struggling manufacturing sector dampening demand for business- to-business services and consumers remaining far less inclined to spend on luxuries such as travel and recreation than earlier in the year.
"The more challenging demand environment has dampened firms’ pricing power, squeezing service sector selling price inflation to the lowest for over three years on average during the fourth quarter. With sticky service sector inflation being a key area of concern among Fed policymakers, the slower rate of price increase in December is welcome news."
Another interesting dynamic was in new export orders, with S&P Global reporting: "The overall upturn in new business was dampened by a renewed contraction in new export orders, however. The fall was the first since September and reportedly driven by lower purchasing power among customers in key export markets."
That highlights the dichotomy between the US and elsewhere that could ultimately lead to less inflation in the US.
