US services PMI sees December slowdown but continued health in the economy

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Service sector managers still see relatively healthy prospects (Source: Getty)

US services are experiencing a slight slowdown in December after peaking in October, according to a widely followed indicator of economic activity, but the indicator still shows healthy confidence levels in the world's largest economy.

The US services purchasing managers’ index (PMI) fell to 53.4 in December, down from the 54.6 level last month, according to IHS Markit.

However, the value stayed well above 50, indicating a net positive outlook for the US. The fourth quarter average showed services finishing the year strongly, after a sharp fall in business morale at the end of 2015.

Read more: US services PMI grows at fastest since October 2015 pushing Dow to new high

Chris Williamson, chief business economist at IHS Markit said: “Although service sector growth cooled in December, the PMI surveys indicate that the economy continued to show solid, steady growth at the end of the year.”

The composite PMI index – which includes both services and manufacturing – fell to 53.7 in December, from 54.9 the month before.

The US economy has continued to exhibit rude health in the final months of Barack Obama’s Presidency. Annual GDP growth increased to 3.2 per cent in the third quarter of 2016, and unemployment at 4.6 per cent remains at the lowest point since before the financial crisis.

The PMI survey shows firms taking on more workers, with the fastest hiring rate since March, raising the prospect of stronger growth in the coming months.

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“The December slowdown looks likely to be a temporary blip, not least because firms took on staff in increasing numbers in the expectation of rising workloads in 2017,” said Williamson.

Continuing rises in employment make it more likely the Federal Reserve will stick to its consensus view of three interest rate rises in 2017.

The policies of President-elect Donald Trump – based on campaign promises – indicate expansionary fiscal policies which have driven stock markets to record highs.

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