People shop at a Whole Foods Market grocery store on December 17, 2024 in New York City.
Spencer Pratt | Getty Images
Activity in the U.S. services industry accelerated in December, as companies worried about the impact of tariffs on inflation and expectations for price increases rose sharply.
The Institute for Supply Management’s service index on Tuesday hit a reading of 54.1%, representing the percentage of companies expected to grow. That’s up 2 percentage points from November and beat the 53.4% consensus estimate in a Dow Jones survey of economists.
Along with the improvement in overall numbers, the price index rose to 64.4%, an increase of 6.2 points or more than 10%. This is the first time the index has exceeded 60% since January 2024, said Steve Miller, chairman of ISM’s Corporate Research Committee. The price index reached its highest level since February 2023.
“While there was general optimism across many industries, concerns about tariffs elicited the most comments from our panelists,” Miller said.
President-elect Donald Trump has vowed to impose sweeping tariffs after taking office later this month. President Trump on Monday denied a Washington Post report that he was considering a broader, more targeted approach.
This month’s ISM Manufacturing Survey also reflected the rise in prices, with the index rising to 52.5%, an increase of 2.2 points from the previous month.
Government bond yields rose after the policy decision, especially at the end of the long-term interest rate curve. The yield on the benchmark 10-year Treasury note was last seen at 4.68%, up 0.065 percentage points (6.5 basis points) during the session.
10 year yield
In the services survey, multiple respondents cited tariffs as a concern, noting that the business environment to end 2024 is generally positive.
A respondent from the transportation and warehousing industry said, “There seems to be a lot of uncertainty regarding tariffs and purchasing decisions. There’s a lot of wait-and-see.”
“We are generally optimistic that the next administration will have a positive impact on regulatory, tax, and energy policies that will improve the economy. We are concerned about tariff activity and hope for the best.” manager reported.
The corporate activity index also increased by 4.5 points to 58.2%.
Employment remained almost unchanged at 51.4%. According to the ISM manufacturing industry survey, the index decreased by 2.8 points to 45.3%. An ISM survey reading below 50% represents a contraction.
As the Federal Reserve considers future monetary policy moves, it is extremely important to read trends in inflation and the employment situation. The central bank lowered the standard borrowing rate by 1 percentage point from September to December 2024, but is expected to move at a more cautious pace going forward as it evaluates future economic indicators.
A separate report on Tuesday showed job openings rose slightly in November, while job turnover fell.
According to the Department of Labor’s job openings and turnover survey, there were 8.1 million job openings, an increase of 259,000 over the month and more than the Dow Jones estimate of 7.7 million. At the same time, the number of people who quit fell by 218,000 to 3.06 million.
The level of available worker vacancies was approximately 1.1 to 1.
