#United States #Economic Growth #Tempe #ISM Report #Services PMI

Overview of December 2025 ISM® Services PMI® Report

In its latest report released on January 7, 2026, the Institute for Supply Management® (ISM®) indicated that economic activity within the services sector of the United States has shown continued expansion, with the Services PMI® reaching a notable 54.4%. This figure marks a significant rise of 1.8 percentage points compared to November's reading of 52.6%. Notably, this is the third consecutive month of growth, marking 2025's end on an optimistic note.

Key Indices Overview

The report's highlights included several key indices which provide insights into different facets of economic activity:
1. Business Activity Index: Registered at 56%, demonstrating an increase from November's 54.5%. This marks a sustained period of expansion in business activities, with potential growth in several key industries.
2. New Orders Index: Climbed to 57.9%, indicating a robust increase in new orders, which grew 5 percentage points since November. This suggests rising demand for services in the market.
3. Employment Index: The Employment Index broke into expansion territory for the first time in months, reaching 52%. This reflects an increase in hiring efforts and a potential stabilization in the labor market.
4. Supplier Deliveries Index: Recorded at 51.8%, this figure suggests continued slower delivery performance, a reflection of increasing market demands.
5. Prices Index: Although it remains high at 64.3%, it decreased slightly from November’s 65.4%. This indicates that while prices for services are still rising, the rate of increase is slowing.

Economic Context

The overall services economy has now expanded for the 67th consecutive month, and the Services PMI® level of 54.4% points to a corresponding increase in real GDP, expected to rise by approximately 1.9% on an annualized basis. However, it's noteworthy that the 12-month average PMI continues to trend downwards and has dropped more than 10 points since February 2022.

Industry Performance

In December, eleven service industries reported growth, while five showed contraction. Notable areas of growth included:

• - Retail Trade
• - Finance and Insurance
• - Accommodation and Food Services
• - Transportation and Warehousing
• - Arts and Recreation

Conversely, the sectors reporting contraction included:

• - Management of Companies
• - Professional, Scientific, and Technical Services
• - Agriculture and Educational Services

Insights from Respondents

Survey respondents shared various observations that underline the complexities they face:

• - Some voiced concerns about rising prices attributed to trade policies and tariff impacts, especially those reliant on imports like seafood and coffee.
• - While the demand for value brands remains notable, premium brands are reportedly struggling.
• - Employee shortages and inflationary pressures continue to affect service delivery, alongside increasing regulatory requirements and supply chain challenges.
• - Industries like health care expressed growing demands for specific resources, such as respiratory equipment, amid rising flu cases.
• - Overall sentiment remained largely positive, with respondents noting robust business activities due to the holiday season.

Look Ahead

As we move into 2026, the continuation of positive trends, indicated by December's PMI readings, sets a hopeful stage amidst varying challenges. The preliminary expectations for 2026 include maintaining flat national home prices with slight increases projected. The ongoing infrastructure and market demands will shape the economic landscape while firms balance pricing and cost pressures.

In conclusion, the December 2025 ISM® Services PMI® report provides optimism for the services sector's trajectory and hints at sustainable growth prospects as businesses enter the new year, even amidst economic fluctuations.