U.S. Service Sector Index (NMI) Cools, But Growth Remains Robust

The U.S. Service Sector cooled slightly in December after months of threatening to overheat. The Institute for Supply Management (ISM) Non-Manufacturing Index (NMI) came in at 57.6, lower than the consensus forecast but still reflecting robust growth.

“The non-manufacturing sector’s growth rate cooled off in December. Respondents indicate that there still is concern about tariffs, despite the hold on increases by the U.S. and China,” Anthony Nieves, Chair of the ISM Non-Manufacturing Business Survey Committee. “Also, comments reflect that capacity constraints have lessened; however, employment-resource challenges remain.”

“Respondents are mostly optimistic about overall business conditions.”

The headline Business Activity Index has reflected growth for the 113th consecutive month.

The New Orders Index ticked up 0.2% in December to 62.7%, while the Employment Index declined 2.1% to 56.3%.

Survey Panel Responses

“Economy still chugging along, despite the rise in interest rates and relentless political claptrap. Mid-winter [activity] appears to be helping a variety of sectors, including agriculture and construction.” (Finance & Insurance)

• “Economy still chugging along, despite the rise in interest rates and relentless political claptrap. Mid-winter [activity] appears to be helping a variety of sectors, including agriculture and construction.” (Finance & Insurance)
• “Overall, our year-end outlook is positive. We are already receiving converted RFPs to orders for 2019. Based on the uncertainty of the tariffs, we have advised our clients to make purchases early in first quarter 2019, if possible, to save money. There is concern in our industry regarding the full year due to tariffs, unless a deal can be reconciled with China. We expect lower profit margins and reduced sales for 2019 until our suppliers can source product from other countries, which may not be until late [in the year].” (Management of Companies & Support Services)
• “Business is still on an uptrend. Receiving more inquiries for training going into new year.” (Professional, Scientific & Technical Services)
• “Steady demand and supply. Finding qualified employees is a challenge.” (Public Administration)
• “Business is exceeding expectations. 2019 should equate or exceed 2018.” (Real Estate, Rental & Leasing)