U.S. Services Industry Sees Surge in Activity, But Tariffs Fuel Concerns Over Inflation
The Institute for Supply Management’s (ISM) services index jumped to 54.1% in December, a 2-percentage-point increase from November. The index measures the share of businesses expecting growth. This marks the highest reading since January 2024, according to ISM’s Business Survey Committee Chair, Steve Miller.
The prices index also saw a significant increase, reaching 64.4%, a 6.2-point jump from the previous month. This is the first time the index has surpassed 60% since January 2024. Miller noted that while there was general optimism in many industries, tariff concerns elicited the most comments from panelists.
The ISM manufacturing survey also showed higher prices, with the index rising to 52.5%, a 2.2-point increase from the previous month. Treasury yields also rose following the release, with the 10-year note yielding 4.68%, a 6.5-basis-point increase.
Many respondents cited tariffs as a concern, with some expressing uncertainty about purchasing decisions and the potential impact on their businesses. Some businesses expressed optimism about the incoming administration’s potential to positively impact regulatory, tax, and energy policies, but others were concerned about the effect of tariffs on their operations.
The business activity index also saw an increase, rising to 58.2%, a 4.5-point gain. Employment levels remained relatively unchanged, at 51.4%, while the ISM manufacturing survey showed a decline in employment to 45.3%, a 2.8-point drop.
The readings on inflation and employment are critical for the Federal Reserve as it considers future monetary policy moves. The Labor Department’s Job Openings and Labor Turnover Survey showed available job openings increasing to 8.1 million, with fewer workers quitting their jobs. The level of job openings to available workers held steady at around 1.1 to 1.2.