US services sector slows down; factory orders at 1992 high

WASHINGTON, United States – US services sector activity slowed in December, with orders at the end of the year showing weakness in many areas, the Institute for Supply Management said.

But the services industry, the largest part of the US economy, showed some positive signs of stronger employment and rising prices.

The ISM purchasing managers index for the services industry fell to 53.0 from 53.9 in November, the slowest pace during 2013. The index was at 55.2 in January 2013. A number above 50 denotes expansion.

The slowdown parallelled a December easing in the manufacturing sector: the ISM’s manufacturing PMI fell to 57.0 from 57.3 last month.

Half of the 16 services sectors reported expansion while the other half contracted, the ISM said.

There was some slowdown impact on businesses from the holiday season and severe weather.

“Early, severe winter weather has had a major impact on business. Both customers and employees were unable to reach the workplace,” said a respondent in the entertainment and recreation industry.

Among components of the services PMI, business activity was slightly slower while new orders contracted.

But the employment sub-index rose to 55.8 from 52.5 and prices were up to 55.1 from 52.2.

“The drop in orders to a 55-month low of 49.4 from 56.4 is very unwelcome; we hope it is a fluke but next month needs to be watched closely,” said Ian Shepherdson of Pantheon Macroeconomics.

Factory orders hit 11-year high

In the meantime, new orders for US manufactured goods surged in November to their highest level since 1992, lifted by rises in aircraft and ship orders, the Commerce Department said.

New factory orders rose 1.8% from October to $497.9 billion in November, the highest monthly level since the current data series began in 1992, the department said.

Excluding transportation, new orders were up 0.6% in November.

The November reading marked a rebound from October’s revised 0.5% decline and was in line with analyst expectations.

Transportation equipment, a sector that can be volatile month-over-month, led the November surge. New transportation orders, which have climbed for three of the past four months, advanced 8.3% to $81.1 billion.

Orders for ships and boats soared by 22.5% from October, followed by commercial aircraft, up 21.8%. Motor vehicle orders rose 2.4%. – Rappler.com