The ISM Non-Manufacturing Index Declined to 55.9 in December


Implications:  The pace of growth in service sector activity slowed in December, following a robust lead-up to the holiday season.  Even with the cooldown in December, service sector activity in 2017 averaged a very healthy reading of 57.0.  To put that in perspective, it's the second highest annual average going back to 2005.  Fourteen of eighteen industries reported growth in December (three reported contraction), while all major measures of activity stand comfortably in expansion territory.  The most forward looking indices – new orders and business activity – both fell in December, but survey respondents note a positive outlook for 2018.   With tax reform passing in late December, there is added incentive for business – both in the services and manufacturing sector - to increase investment and activity in the new year, which we expect will appear in the numbers within the next few months.  Supplier deliveries remain elevated from the levels that we saw earlier in 2017, before the hurricane season. There may still be remnants of storm impacts, but this likely also reflects the pickup in orders and activity surrounding the strong holiday season.   The prices paid index rose to 60.8 in December, with rising prices cited across fuel types.  On the jobs front, the employment index rose to 56.3 from 55.3 in November. Jobs data out this morning shows a more complete picture of the jobs market, which – along with the ISM services and manufacturing indices – paints a picture of a growing economy.  The stage is set for the pickup in activity that started in mid-2016 to continue in the months ahead, and policy developments out of Washington have the potential to make 2018 a breakout year.

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Posted on Friday, January 5, 2018 @ 11:41 AM

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.