US services sector growth slows in December

The massive US services sector slowed to its weakest pace in 2015 in December, but still outperformed the struggling manufacturing sector, a closely watched private survey showed Wednesday.

The Institute for Supply Management (ISM) said its purchasing managers index for non-manufacturing activity fell to 55.3 in December, the second straight month of decline after a November reading of 55.9.

The slowdown of the services sector, which accounts for about 80 percent of the US economy, was unexpected, with analysts estimating a slight pickup for the December holiday season.

"Though this was the fourth decline in the past five months, the index remains elevated and doesn't suggest that cracks are forming in the non-manufacturing segment of the economy," said Ryan Sweet of Moody's Analytics.

The services sector has registered growth, a PMI reading above 50, for 71 consecutive months. That contrasts with manufacturing, where activity contracted for a second straight month in December, according to ISM data released Monday.

New orders, employment and business activity picked up last month. Supplier deliveries accelerated, pushing the ISM's sub-index reading for deliveries to 48.5, indicating slowing growth.

"Faster deliveries in December contributed to the overall slight slowing in the rate of growth," said Anthony Nieves, head of the ISM non-manufacturing survey committee. "All of the other component indexes increased in the month of December."

Eleven of the 18 industries surveyed reported growth, led by accommodation and food services; five reported contraction.

Nieves said that the majority of respondents' comments in its December poll "remain positive about business conditions and the overall economy."

"Currently very busy in the holiday rush season. Purchasing of supplies, postage and freight, and direct labor all more than double non-holiday periods," said a person in the transportation and warehousing industry.

"The supply chain is faster than in previous years and equipment is more readily available," a wholesale trade purchasing manager said.

Barclays Research analyst Rob Martin said the weak headline PMI masks renewed strength in the underlying components of the series.

"We continue to see strong domestic demand and a robust non-manufacturing sector as driving US activity over the medium term," Martin said.