U.S. Service Sector Unexpectedly Expands At Slower Rate In December

(RTTNews) - Activity in the U.S. service sector unexpectedly grew at a slower rate in the month of December, according to a report released by the Institute for Supply Management on Monday.

The ISM said its non-manufacturing index edged down to 53.0 in December from 53.9 in November, although a reading above 50 still indicates growth in the service sector. With the drop, the index fell to its lowest level since hitting 52.8 in June.

The modest decrease came as a surprise to economists, who had been expecting the index to creep up to a reading of 54.8.

The unexpected decrease by the headline index was partly due to a downturn by new orders, as the new orders index tumbled to 49.4 in December from 56.4 in November.

However, Anthony Nieves, chair of the ISM Non-Manufacturing Business Survey Committee, said, "Despite the substantial decrease in the New Orders Index, respondents' comments predominately reflect that business conditions are stable."

The report also showed that the inventories index slid to 48.0 in December from 54.0 in November, while the backlog of orders index dropped to 46.0 from 49.0.

The business activity index showed a much more modest decrease, slipping to 55.2 from 55.5 and continuing to indicate an expansion.

Additionally, the ISM said the employment index jumped to 55.8 in December from 52.5 in November, indicating a faster rate of job growth in the service sector.

Rob Carnell, chief international economist at ING, said, "With non-farm payrolls released at the end of this week, the employment index of the non-manufacturing ISM is generally the main bit of this survey we look out for, and it has come in on the strong side - supporting hopes for a further figure of 200K or thereabouts."

The report also showed that the prices index climbed to 55.1 in December from 52.2 in November, pointing to faster price growth.

Last Thursday, the ISM released a separate report showing a modest slowdown in the pace of growth in U.S. manufacturing activity in December.

The ISM said its purchasing managers index edged down to 57.0 in December from 57.3 in November. The modest decrease by the index matched economist estimates.

With the modest decrease, the index gave back some ground after reaching its highest level since April of 2011 in November.