Services Indexes Slow

The services PMI slowed to 54.3 for the final December reading, well down from November's 56.1 but up 6 tenths from the December flash of 53.7. Growth in new orders came in at its slowest rate since the weather disruptions in January last year with some respondents citing a "wait-and-see" approach among customers. Though output is slowing and backlogs are being worked down, the sample is still adding employees at a solid pace. Price data are soft with both input inflation and output charges continuing to moderate. Another negative is an easing in business expectations to their least optimistic level since July. But the hiring in this report is clearly a positive and hints at what may be Friday's conflicting theme -- strong job growth amid slowing activity.

...meanwhile...

There may be export-related weakness in the manufacturing sector but it has yet to spill over to the overall economy. ISM's non-manufacturing index did slow 6 tenths to 55.3 in December but the level is still very solid and details are positive. New orders are up 7 tenths to a very strong 58.2 while employment is also up 7 tenths, to 55.7. The sample is building up inventories which hints at expectations for solid business ahead. Another positive is the export index which, like the ISM manufacturing report issued Monday, bounced solidly higher and back into the plus-50 growth column, at 53.5. Input prices show very little change. This report continues to be consistent and solid underscoring the strength of the nation's domestic-based economy.

Recent History Of This Indicator:
Pushing toward 60, the ISM non-manufacturing index had been running at very strong rates of growth before November's report when the index slowed substantially to 55.9 in what, however, is still a very solid reading and confirmation of strength in domestic demand. The Econoday consensus is looking for a slight bounce higher in December to 56.2.