U.S. Services Sector Contracted at Faster Pace in December; Inflation Pressures Ease -- S&P Global

By Xavier Fontdegloria

U.S. services activity declined in December for a sixth consecutive month, with signs that the contraction deepened at year-end, according to a purchasing managers survey released Thursday.

The S&P Global U.S. Services PMI decreased to 44.7 in December from 46.2 in November, slightly up from its preliminary reading of 44.4 and below the 50.0 threshold which separates expansion from contraction. The change in the index level suggests that services activity weakened further.

The decline in services activity was driven by falls in output and new orders amid waning demand, mainly due to the impact of higher interest rates and inflation on customer spending, the report said.

"U.S. private sector firms brought 2022 to a close signalling marked obstacles to overcome with relation to the health of the economy," said Sian Jones, senior economist at S&P Global.

Despite weak demand, services firms continued to hire staff, albeit only slightly, according to the survey.

Lower services activity led to easing price pressures, S&P Global said. Services providers said that although supplier and wage bills rose sharply, these costs were partly offset by falls in some key input prices. Both cost inflation and selling prices moderated to the slowest rate in at least two years, the report said.

"The pass through of cost savings in the form of customer discounts will likely signal further adjustments to inflation as we enter 2023," Ms. Jones said.

The S&P Global U.S. Composite PMI, which tracks activity in both manufacturing and services sectors, fell to 45.0 in December from 46.4 in November.

Write to Xavier Fontdegloria at [e-mail]

(END) Dow Jones Newswires

01-05-23 1019ET