US service industry grows more slowly in December

SILVER SPRING, Md. (AP) — Growth in the U.S. service industry, where most Americans work, pulled back in December after expanding at a record pace the previous two months.

The Institute for Supply Management reported Thursday that its monthly survey of service industries declined to a reading of 62 last month, from an all-time high of 69.1 in November. Any reading above 50 indicates growth.

Since recording two months of contraction last year in April and May when the pandemic was raging, the overall index has now grown for 19 consecutive months.

Anthony Nieves, head of the ISM services sector survey committee, said growth in the services industry is still strong and that it didn’t appear that the recent surge of the COVID-19 omicron variant had any impact on the December activity in the sector. It’s more likely to affect next month’s activity, if the virus surge is not contained before then, he added.

Business activity, employment, new orders and supply deliveries all showed slower growth in December, the ISM report said.

The ISM’s inventories index contracted for the seventh straight month, as continued supply chain logjams, along with strong demand, has made it difficult for companies to keep shelves stocked. Prices paid by services organizations for materials and services rose in December for the 55th consecutive month, to its third-highest reading ever of 82.5.

Some strengths in the services sector is the result of those supply chain troubles that are making it harder to meet increased demand. Longer supplier delivery times and rising prices register as strengths for the services sector.

Companies are still reporting some difficulty hiring with a job market healthier than its been since the pandemic began nearly two years ago. The unemployment rate fell to 4.2% last month, a level that most economists consider close to full employment.

The Federal Reserve said last month that in part because of the strong employment situation, its low-interest rate policies are no longer needed. Those low rates were intended to encourage more hiring and the Fed now has its eyes on an overheating economy, signaling that it would quickly raise rates to rein in inflation that has ballooned to four-decade highs.

Out of 18 service sector industries covered by the ISM, 16 reported growth in December.

Copyright 2022 The Associated Press.