By Xavier Fontdegloria
Growth in the U.S. services sector cooled in December to a still solid pace supported by a rise in new business, data from IHS Markit's survey of purchasing managers showed Wednesday.
The final U.S. Services Purchasing Managers' Index compiled by IHS Markit decreased to 57.6 in December from 58.0 in November, above the 57.3 forecast from economists polled by The Wall Street Journal. The final reading was broadly in line with the flash estimate of 57.5.
The indicator signals that the U.S. services sector continued to grow robustly, as a reading above 50 indicates expansion. The survey didn't fully capture the effects of the Covid-19 Omicron variant, which has caused a sharp increase in infections across the country in recent weeks.
"Service sector business activity growth remained strong in December, supporting indications of a solid uptick in economic growth at the end of 2021," said Sian Jones, senior economist at IHS Markit.
Services providers reported an uptick in new business and the sharpest increase in client demand since July due to new customer acquisitions and contract gains, the report said.
However, labor shortages and challenges retaining staff continued, as it did input shortages. Higher wage bills and increased transportation fees drove the rate of cost inflation up to a new record high, IHS Markit said.
The degree of optimism regarding the year-ahead outlook was the highest since November 2020 as firms were hopeful of more favorable labor market and supply-chain conditions going into 2022, the report said.
However, the swift spread of the Covid-19 Omicron variant presents new downside risks into the economic outlook, Ms. Jones said.
IHS Markit said the Composite PMI Index--which combines manufacturing and services sectors--fell marginally to 57.0 in December from 57.2 in November. The data point to steep increase in private sector business activity, albeit largely driven by the service sector as manufacturing production rose at a relatively muted pace, it said.
Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com
(END) Dow Jones Newswires
01-05-22 1022ET
