January 5, 2018 11:45 AM, EST

US Services Index Falls to Four-Month Low as Orders Moderate

A employee places donuts in a box for a customer at a Dunkin' Donuts Inc. location in Los Angeles. Patrick T. Fallon/Bloomberg News.

America’s service industries expanded in December at the weakest pace in four months as orders cooled at companies that make up the bulk of the economy, a survey from the Institute for Supply Management showed Jan. 5.

Highlights of ISM Non-Manufacturing for December

• Non-manufacturing index fell to 55.9 (estimated 57.6) from 57.4; readings above 50 indicate growth.

• New orders gauge dropped to 54.3, the lowest since August 2016, from 58.7.

• Employment measure advanced to 56.3 from 55.3.

Key Takeaways

The unexpected slowdown in services, which represent almost 90 percent of the economy, is at odds with ISM manufacturing data this week showing factory managers the most upbeat in three months on stronger orders and output.

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The decline in the gauge of service providers such as retailers and builders indicates growth is settling back to a more sustainable, yet still solid, pace. Last year, the ISM’s services measure last year averaged 57, the second-strongest since 2005.

A gauge of inventory sentiment within the various non- manufacturing industries climbed to a five-month high in December, indicating more view their stockpiles as too high. That may help explain why order growth slowed.

Other Details

• Business activity gauge, which parallels the ISM’s factory production index, fell to 57.3 from November’s 61.4.

• Order backlogs measure eased to 50 from 51.5.

• Prices-paid index was little changed at 60.8 after 60.7.

• Measure of inventory sentiment jumped to 62.5 from 56.

With assistance by Alexandre Tanzi