Share
January 7, 2019 12:30 PM, EST

Service Firms Grew at Slower Pace in December

Retail worker Julio Cortez/Associated Press

WASHINGTON — U.S. service firms grew in December at the slowest pace in five months, a possible indication that various headwinds from turbulent markets to trade tensions could be having an impact on economic activity.

The Institute for Supply Management, which is composed of purchasing managers, reported Jan. 7 that its service index fell to 57.6% last month, down from a November reading of 60.7%. It was the lowest reading since the index stood at 55.7% in July.

Any reading above 50 signals growth. So even with the December decline, the index shows that service industries, where most Americans work, has been expanding for 107 consecutive months.

Retail worker

David J. Phillip/Associated Press

The fall in the services index was led by a big drop in the component that tracks business activity. Other components such as the key new orders index actually rose in December. While the employment component did decline, it was only a modest fall and stood in contrast to the Jan. 4 jobs report that showed the economy created a sizable 312,000 jobs during the month.

The report showed that 16 service industries reported growth in December and only one — mining — reported a decline.

Still, economists said the slowdown in activity in services could be a signal that the economy will slow in 2019 after a strong performance in 2018.

“Virtually everyone is expecting growth to slow this year, but how much and how far the slowdown takes us is still anyone’s guess,” said Chris Rupkey, chief financial economist at MUFG Union Bank in New York.

The weaker reading on the service economy followed a report the week of Dec. 31 that the ISM index for manufacturing slowed to the slowest pace in more than two years, with some manufacturers complaining about the impact of President Donald Trump’s trade policies.