On December 17, 2024, a person shopped at a Whole Foods grocery store in New York City.
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U.S. services sector activity accelerated in December, but expectations for higher prices rose sharply as businesses grew increasingly concerned about the impact of tariffs on inflation.
this Institute for Supply Management Service Index The data released on Tuesday was 54.1%, representing the proportion of companies expected to grow. That was up 2 percentage points from November and above the 53.4% consensus forecast in a Dow Jones economists’ survey.
As the overall data improved, the price index jumped to 64.4%, an increase of 6.2 points, an increase of more than 10%. Steve Miller, chairman of the ISM Business Survey Committee, said this is the first time the index has exceeded 60% since January 2024. The price index hit its highest level since February 2023.
“Optimism was broadly expressed across many industries, but tariff concerns prompted comments from most panelists,” Miller said.
President-elect Donald Trump has vowed to impose sweeping tariffs when he takes office later this month. Trump on Monday Deny the Washington Post report He is considering a narrower, more targeted approach.
this ISM Manufacturing Survey Higher prices were also reflected this month, with the index rising to 52.5%, up 2.2 points month-on-month.
Treasury yields, especially those on longer-term Treasuries, moved higher after the release. The benchmark 10-year Treasury note recently yielded 4.68%, up 0.065 percentage point, or 6.5 basis points, on the day.
10-year return rate
In the services survey, several respondents said tariffs were a concern, while pointing to an overall positive outlook for the business environment in 2024.
“There seems to be a lot of uncertainty about tariffs and procurement decisions. A lot of people are waiting and watching,” said one respondent in the transportation and warehousing industry.
“There is widespread optimism that the incoming administration will have a positive impact on regulatory, tax and energy policies, spurring an improvement in the economy. We are concerned about the tariff activity and hope for the best,” said an information services manager the report said.
The business activity index also rose, rising to 58.2%, an increase of 4.5 points.
Employment was little changed at 51.4%; in the ISM manufacturing survey, the index fell to 45.3%, a decrease of 2.8 points. Any reading below 50% in the ISM survey indicates contraction.
Data on inflation and employment conditions are critical for the Fed as it considers the direction of future monetary policy. The central bank lowered its benchmark borrowing rate by a full percentage point between September and December 2024, but is expected to move at a more cautious pace as it assesses upcoming economic data.
A separate report on Tuesday showed job openings rose in November while fewer workers left their jobs.
Labor Department Job vacancy and labor turnover surveys The number of available positions rose to 8.1 million, with an increase of 259,000 this month, higher than Dow Jones’ estimate of 7.7 million, the data showed. At the same time, the number of exits fell to 3.06 million, a decrease of 218,000.
The job-vacancy ratio for existing workers remains at around 1.1 to 1.
