(Kitco News) – The U.S. service sector strengthened further into expansionary territory last month, but the prices index also spiked higher, according to the latest data from the Institute for Supply Management (ISM).
The ISM announced on Tuesday morning that its Services Purchasing Managers Index rose to 54.1 in December, up from November’s reading of 52.1. The data was better than expected, as economists were looking for a reading of 53.5.
“The reading in December marked the 10th time the composite index has been in expansion territory this year,” said Steve Miller, chair of the Institute for Supply Management Services Business Survey Committee. “The Services PMI in December was boosted primarily by strength in the Business Activity and Supplier Deliveries indexes.”
Readings above 50 in such diffusion indexes signify economic growth and vice-versa. The farther an indicator is above or below 50, the greater or smaller the rate of change.
Gold sold off sharply following the 10 am EDT release, with spot gold falling from $2,659 per ounce just before the data to $2,643 in the minutes afterward. Spot gold last traded at $2,650.33 for a gain of 0.54% on the daily chart.
The components of the report largely showed improvement. The New Orders Index rose to 54.2, up from 53.7 in November. At the same time, the Business Activity Index rose to 58.2, compared to November’s reading of 53.7, and the Supplier Deliveries Index rose to 52.5, up from 49.5 recorded the prior month.
Inflation pressures also shot up in the sector, however, with the Prices Index coming in at 64.4 in December, significantly higher than November’s reading of 58.2.
The service sector labor market declined in December, but remained in expansionary territory, with the Employment Index falling to 51.4, slightly below the prior month’s 51.5 level.
“Many industries noted that end-of-year and seasonal factors were helping drive business activity or impact inventory management,” Miller said. “Some of the increased business activity seems to have been driven by preparation for demand in the new year, or risk management for impacts from ports strikes and potential tariffs. There was general optimism expressed across many industries, but tariff concerns elicited the most panelist comments.”
