December 2024 Services PMI Report: Signs of Continued Economic Expansion
The latest Services ISM® Report On Business® reveals encouraging news for the U.S. economy, with the Services PMI® climbing to 54.1% in December 2024, a significant rise from the previous month's 52.1%. This marks the sixth consecutive month of expansion in the services sector and the 52nd month of growth since the recovery began from the pandemic-induced recession in June 2020.
Steve Miller, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee, emphasized the positive momentum seen in the report. Notably, the Business Activity Index surged to 58.2%, signifying a continuous increase in service activities for the sixth month running. Moreover, new orders also showed improvement, with an index reading of 54.2%. Employment figures maintained a steady growth, though slightly decreased to 51.4%. This suggests that while hiring is slow, it remains above the neutral 50% mark.
The Supplier Deliveries Index stood at 52.5%, indicating slower delivery performance, which is a typical scenario when the economy is improving and demand is rising. This is supported by increasing prices, with the Prices Index jumping to 64.4%. This rise is notable as it signifies escalating costs faced by service industries, continuing a trend that has persisted for 91 consecutive months.
Interestingly, inventory levels showed some contraction, with the Inventories Index at 49.4%. This reflects businesses managing their supplies cautiously amid active preparation to meet future demand.
In December, nine service industries reported growth, including Finance & Insurance, Retail Trade, and Accommodation & Food Services, among others. However, six industries, particularly Real Estate and Educational Services, faced contractions in activity. Respondents shared their sentiments about ongoing challenges such as inflation affecting purchasing decisions and apprehensions around tariffs from the incoming administration.
Overall, there appears to be a blend of optimism and caution among businesses as they navigate economic uncertainties. Companies are diversifying their supply sources in anticipation of potential tariffs, and some are working to manage costs effectively amidst rising inflation.
As we move into 2025, the Services PMI® suggests a robust outlook for the overall economy. The December figure of 54.1% is associated with a projected GDP growth of approximately 1.7%, reinforcing the importance of the services sector as a crucial component of economic health in the coming year. With industries continually adapting to the evolving landscape, the focus will be on leveraging this growth momentum while addressing impending challenges head-on.
Key Highlights of the Report
Steve Miller, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee, emphasized the positive momentum seen in the report. Notably, the Business Activity Index surged to 58.2%, signifying a continuous increase in service activities for the sixth month running. Moreover, new orders also showed improvement, with an index reading of 54.2%. Employment figures maintained a steady growth, though slightly decreased to 51.4%. This suggests that while hiring is slow, it remains above the neutral 50% mark.
Supplier Deliveries and Inventory Insights
The Supplier Deliveries Index stood at 52.5%, indicating slower delivery performance, which is a typical scenario when the economy is improving and demand is rising. This is supported by increasing prices, with the Prices Index jumping to 64.4%. This rise is notable as it signifies escalating costs faced by service industries, continuing a trend that has persisted for 91 consecutive months.
Interestingly, inventory levels showed some contraction, with the Inventories Index at 49.4%. This reflects businesses managing their supplies cautiously amid active preparation to meet future demand.
Industry Growth and Challenges
In December, nine service industries reported growth, including Finance & Insurance, Retail Trade, and Accommodation & Food Services, among others. However, six industries, particularly Real Estate and Educational Services, faced contractions in activity. Respondents shared their sentiments about ongoing challenges such as inflation affecting purchasing decisions and apprehensions around tariffs from the incoming administration.
Future Outlook
Overall, there appears to be a blend of optimism and caution among businesses as they navigate economic uncertainties. Companies are diversifying their supply sources in anticipation of potential tariffs, and some are working to manage costs effectively amidst rising inflation.
As we move into 2025, the Services PMI® suggests a robust outlook for the overall economy. The December figure of 54.1% is associated with a projected GDP growth of approximately 1.7%, reinforcing the importance of the services sector as a crucial component of economic health in the coming year. With industries continually adapting to the evolving landscape, the focus will be on leveraging this growth momentum while addressing impending challenges head-on.
Topics General Business）
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