U.S. Services Gauge Falls to Five-Month Low as Business Cools

Expansion in U.S. service industries slowed by more than expected in December to end the year on a weaker note as measures of business and employment fell, though new orders remained strong.

The Institute for Supply Management’s non-manufacturing index declined to 57.6, the lowest since July and below the median estimate of economists for 58.5, according to a report Monday. The drop was led by the biggest decline in more than a decade in a measure of supplier-delivery times, as well as a decrease in the gauge of business activity. New orders rose to a six-month high.

The drop follows a bigger plunge last week in ISM’s gauge of manufacturers, adding to reasons for some caution on the U.S. economic outlook even after robust figures on jobs and wages reported Friday. At the same time, the ISM services index remains at a healthy level and the pickup in orders indicates demand is still solid.

There was little indication in the data of the trade war with China weighing on business: Export orders accelerated, while a measure of imports eased only slightly. Also, a gauge of prices fell to the lowest in more than a year, possibly reflecting a tumble in oil and fuel costs.

The bottlenecks facing service companies are clearing up: a measure of backlogs fell to an 11-month low, and delays in supplier deliveries eased for a second month.

The employment gauge dropped for a third month while remaining at an elevated level. Friday’s jobs data from the Labor Department showed private service providers added the most workers in December in more than a year.

The main gauge decreased from 60.7 in November and covers sectors representing about 90 percent of the U.S. economy. Readings above 50 signal expansion.

The inventories gauge fell by the most since 2016, indicating that stockpiles are still expanding but at a slower pace.