U.S. economy stumbles at year’s end, ISM finds

The numbers: A barometer of business conditions at service-oriented companies fell in December to a seven-month low, suggesting a hiccup for the U.S. economy.

The Institute for Supply Management’s survey dropped to 50.6% from 52.7% in the prior month.

Numbers over 50% are viewed as positive for the economy. The index ranged between 50% and 55% throughout 2023.

“The services sector had a pullback in the rate of growth in December, attributed to the decrease in the rate of growth for new orders and contraction in employment,” said Anthony Nieves, chair of the survey.

“There are concerns related to economic uncertainty, geopolitical events and labor constraints,” he added.

Economists by polled by the Wall Street Journal had predicted an ISM reading of 52.5% for the final month of the year.

Key details:

  • The production gauge rose 1.5 points to 56.6%.

  • The new-orders index dropped 2.7 points to 52.8%.

  • The employment barometer fell 7.4 points to 43.3%, contradicting a sizable increase in service jobs in the December employment report.

  • The prices-paid index, a measure of inflation, slipped 0.9 points to 57.4%.

Big picture: The economy slowed in the final quarter of 2023, but it’s still expanding at a fairly healthy pace despite sharply higher interest rates.

What’s more, the prospect of a reduction in rates later in the year if inflation continues to taper off could also give support to the economy and possibly stave off a recession.

Market reaction: The Dow Jones Industrial Average
DJIA,
+0.33%
and S&P 500
SPX,
+0.58%
rose in Friday trading after a strong U.S. jobs report.

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