US private-sector activity signaled “modest” expansion in December led by the services component, while output expectations over the coming year improved, according to S&P Global’s (SPGI) flash purchasing managers’ index released Friday.
The composite output index this month rose to 51 — a five-month high — from 50.7 in November, topping the 50.5 consensus in a survey complied by Bloomberg. The 50-point mark separates expansion from contraction. Services sector output rose to a five-month high of 51.3 in December from 50.8 last month, while the manufacturing PMI fell to a four month-low of 48.2 from 49.4. Wall Street was looking for 50.7 and 49.5, respectively.
“Looser financial conditions have helped boost demand, business activity and employment in the service sector, and have also helped lift future output expectations higher,” S&P Global Market Intelligence Chief Business Economist Chris Williamson said. “However, the increased cost of living and cautious approach to spending by households and businesses means the overall rate of service sector growth remains far short of that witnessed during the travel and leisure revival back in the spring and summer.”
Manufacturers saw contractions in output, new orders and employment, with companies cutting jobs for the third straight month, the survey showed. Overall, employment increased this month at the fastest rate in three months, as services sector firms logged the fastest gain in headcounts since June.
Input prices grew at the quickest pace since September, while manufacturers and service providers said that inflation “regained momentum,” according to the report.
Business optimism this month was the strongest for six months amid expectations for increased referrals and further improvements to demand conditions next year. However, concerns about “demand fragility” kept sentiment below the long-run
series average, S&P Global said.