Economy Watch: Services Sector Growth Slows in December

The services sector of the economy takes a dip in December, though new factory orders increased in November to their highest level since the Census Bureau has been keeping track.

The Institute for Supply Management reported on Monday that its Non-Manufacturing Index came in at 53.0 for December, a drop from 55.4 in November. That’s still an expansion for the services sector of the economy, but not as much as expected.

The ISM New Orders Index dropped seven points to 49.4, the first time since July 2009 that the metric has signified contraction (below 50) rather than expansion (over 50). Part of the reason might have been the unseasonably severe weather in some parts of the country in December.

The other components of the headline index continued to expand. The organization’s Employment Index increased 3.3 percentage points to 55.8 percent, pointing to growth in employment service sector for the 17th consecutive month and at a faster rate. The Prices Index increased 2.9 percentage points to 55.1 percent, indicating that prices in the sector increased at a faster rate in December than in November.

New Factory Orders Up

The Census Bureau reported on Monday that New Factory Orders – that is, new orders for manufactured goods – were up by 1.8 percent to an annualized $497.9 billion. The uptick followed a decrease of 0.5 percent in October, and was at the highest level since the bureau started measuring orders using its current methodology, back in 1992.

Among durable goods orders, transportation equipment led the increase, up $6.2 billion, or 8.3 percent, for November. New orders for all durable goods were up 3.4 percent, and while new orders for nondurable goods were also up for the month, the rise was only 0.3 percent.

On Monday, the U.S. Senate delayed a vote on extending long-term unemployment benefit until next week. The chamber did, however, vote to confirm Janet Yellen as the next chairman of the Federal Reserve, beginning at the end of this month.

Wall Street was in negative territory for the third day in a row on Monday – and so far for all of 2014 — with the Dow Jones Industrial Average off 44.89 points, or 0.3 percent. The S&P 500 also lost 0.3 percent and the Nasdaq declined 0.4 percent.