December Sees Services PMI Surge to 51.4, Surpassing Forecasts

• In December, the Services PMI rose from 50.8 in November to 51.4.
• The Composite PMI increased from 50.7 to 50.9.
• The robust services sector offers substantial assistance to the U.S. economy.  

On January 4, S&P Global released the final Services PMI report for December, showing an increase from 50.8 in November to 51.4 in December, slightly exceeding the analyst consensus of 51.3. A number above 50 indicates expansion.

The Composite PMI also rose from 50.7 in November to 50.9 in December. Despite the U.S. manufacturing sector remaining in contraction territory, the strong performance of the services sector continues to provide substantial support to the economy.

In their commentary, S&P Global noted that recent financial conditions easing and expectations of potential interest rate cuts in 2024 are providing some support to the financial services sector. The slower rate of price increase in the service sector in December was seen as favorable news amidst concerns about inflation among Fed policymakers.

Following the release of the Services PMI report, the U.S. Dollar Index settled near the 102.50 level. Rising Treasury yields, influenced by reduced bets on a dovish Fed after the FOMC Minutes and hawkish comments from Fed’s Barkin, are bolstering the U.S. dollar. In addition, the robust performance of the services sector is seen as a positive factor for the American currency.

Gold prices are striving to fall below the $2040 level as market focus intensifies on increasing Treasury yields. The impact of the Services PMI data on the gold markets remains uncertain.

The S&P 500 is displaying mostly flat movement as the market attempts to regain stability following a recent pullback. The outlook on Fed policy will continue to be the primary factor influencing equity markets in the near term.