US service sector activity picks up in December, employment rebounds

WASHINGTON: The U.S. services sector activity unexpectedly picked up ‍in December, suggesting the economy ended 2025 on a solid footing. The Institute for ⁠Supply Management said on Wednesday its nonmanufacturing purchasing managers index increased to 54.4 last month from 52.6 in November. Economists polled by Reuters had forecast the ‌services PMI ‌dipping to 52.3.

The services sector accounts for more than two-thirds of U.S. economic activity. ‌The PMI suggested strong momentum in the economy heading into the new year, with even a measure of services employment rebounding to 52.0 after contracting for six straight months. The economy grew at its fastest pace in two years in the third quarter, fueled by robust consumer spending.

Growth is expected ‌to have ‍slowed in the fourth quarter in part because ‍of the 43-day government shutdown and consumers pulling back ‌amid affordability challenges. But the economy is this year expected to get a tailwind from President Donald Trump's tax cuts and fading trade policy uncertainty. The ISM survey's measure of new orders received by services businesses increased to 57.9 last month from 52.9 in November. But backlog orders remained subdued ‍and the pace of decline picked up. Export orders grew after contracting for five consecutive months.


Though prices paid ‍by services businesses ⁠for inputs ⁠slowed further, they remained elevated and suggested inflation could remain above the Federal Reserve's 2% target for some time. The U.S. central bank is expected to keep interest rates unchanged in January. Minutes of the December 9-10 meeting published last week showed deep divisions at that meeting. The ISM's measure of prices paid by businesses slipped to a still-high 64.3 in December from 65.4 in November.