Earlier this morning we saw the ISM services index fall to 53 in December from November’s 53.9 reading.
The new orders sub-index fell 7 points to 49.4 in December, from 56.4 the previous month. This was the weakest reading since May 2009, and a reading below 50 signals contraction.
TD Securities’ Gennadiy Goldberg characterised the detail as “quite concerning.”
“The decline in new orders activity augurs negatively for future service sector performance,” wrote Goldberg in a note to clients.
The new export orders sub-index also tumbled, falling 6.5 pp to 51.5, from 58 the previous month.
The employment sub-index surged to 55.8, but a slowdown in new orders doesn’t bode well for the services sector.
“With service sector employment accounting for the overwhelming majority of U.S. jobs, the recent underperformance in services is a worrying sign for future growth prospects,” says Goldberg. “A further weakening in new orders activity is likely to lead a pullback in the employment component of the services survey, potentially suggesting a slowing in payroll growth.”
December became the fourth straight month in which manufacturing activity outperformed services as measured by the ISM indices.