The services sector is improving. Today’s report from the Institute for Supply Management (ISM) for December rose to 56.1%. Bloomberg was calling for 54.5% and Dow Jones was looking for only 54.0%. The November reading was 54.7%. Today’s ISM data showed expansion in 13 industries and contraction in only five industries.
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It is the individual components of this report that stand out. The ISM said that its Business Activity Index was 60.3% (actually down marginally), its New Orders Index was at 59.3%, and its Employment Index came in up six full points at 56.3%. The prices-paid component fell to 56.6% from 57.0%.
So, why does this matter? A reading above 50% indicates the nonmanufacturing sector economy is generally expanding, while a reading below 50% indicates the sector is generally contracting. The United States has been a services and resources economy for what is now about two decades.
Today’s report was the third best reading for 2012, as February 2012 was 57.3% and January 2012 was 56.8%. The lowest reading of 2012 was 52.1% in June. Today’s report also showed the 41st consecutive month of growth in the Business Activity Index.
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