The U.S. services sector expanded in December as the non-manufacturing business activity composite index was 55.9, compared to 57.4 in November, on a seasonally adjusted basis, the Institute for Supply Management reported Friday.

An index reading below 50 signals a slowing economy, while a level above 50 suggests expansion.

Economists polled by IFR Markets had expected a 57.6 level.

The prices paid index crept to 60.8 from 60.7. The employment index gained to 56.3 from 55.3.

The business activity/production index fell to 57.3 from 61.4, the new orders index was at 54.3, down from 58.7; backlog of orders dropped to 50.0 from 51.5; new export orders decreased to 56.5 from 57.0; inventories slid to 53.5 from 54.5; inventory sentiment gained to 62.5 from 56.0; the supplier deliveries index rose to 55.5 from 54.0; and imports held at 52.5.

Members' general comments on business in the month included:

  • “Many suppliers are proposing price increases, but few are being implemented. Increases in volume and efficiencies seem to be outperforming commodity pricing.” (Accommodation & Food Services)
  • “December is slowing, as is seasonally expected after a strong fall. Business in general is strong [and] within the normal pattern of seasonal fluctuation.” (Management of Companies & Support Services)
  • “Some improvement is jobs from the private sector.” (Professional, Scientific & Technical Services)
  • “Lumber prices are increasing due to product [being] damaged in the recent wildfires. Duties on steel from Vietnam is expected to cause an increase in steel prices. Ongoing shortages in construction related [to] labor continue to be a problem.” (Construction)
  • “Ending the year with profits and business levels on track. 2018 is projected to be as productive with an optimistic outlook.” (Finance & Insurance)
  • “IV solutions are still on national manufacturer back order. Hospital gauze back orders are also causing issues in the industry.” (Health Care & Social Assistance)
  • “We are seeing a resurgence in the business activity of our oil and gas customers, in a positive direction that is impacting our sales.” (Other Services)
  • “Steady end-of-year demand. Forecasting substantial increase in 2018 activity.” (Public Administration)
  • “Sales have slowed in food supply after last month’s buildup for the holidays.” (Retail Trade)

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