The Economy

Growth Rate for Service Firms Slows in December

Surveys of manufacturing and non-manufacturing sectors "suggest the U.S. economy cooled off in the fourth quarter."
Matthew HellerJanuary 7, 2016
Growth Rate for Service Firms Slows in December

Service-oriented companies grew in December for the 71st consecutive month, but at the slowest rate since April 2014, according to the Institute for Supply Management.

The Institute for Supply Management said Wednesday its non-manufacturing index (NMI) fell to 55.3% from 55.9% in November. Readings over 50% indicate more businesses are expanding instead of contracting.

Earlier this week, the ISM reported that economic activity in the U.S. manufacturing sector contracted in December for the second consecutive month, sending the institute’s factory gauge to its lowest level in more than six years.

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“The two ISM reports suggest the U.S. economy cooled off in the fourth quarter,” MarketWatch said. “Economists polled by MarketWatch predict that gross domestic product will expand about 1.9% in the final three months of the year, a touch slower than in the third quarter.”

Most of the ISM’s other non-manufacturing indexes showed increases. The Business Activity Index increased to 58.7%, up 0.5 percentage point on a November reading of 58.2%; the New Orders Index registered 58.2%, up 0.7 percentage point; and the Employment Index increased 0.7 percentage point to 55.7%.

The Prices Index, however, decreased 0.6 percentage point to 49.7%, indicating prices dropped in December for the third time in the last four months.

Eleven non-manufacturing industries reported growth in December, according to the ISM.

“The past relationship between the NMI and the overall economy indicates that the NMI for December (55.3%) corresponds to a 2.8% increase in real gross domestic product on an annualized basis,” Anthony Nieves, chair of the ISM’s Non-Manufacturing Business Survey Committee, said in a news release.