The United States economy is displaying slightly stronger performance as 2023 came to a close, with business activities accelerating to its fastest pace since July. This uptick was primarily driven by the service sector, despite ongoing challenges in manufacturing.
According to the S&P Global Manufacturing PMI Flash for December, the index stands at 48.2, a decline from November's 49.4 and falling short of the consensus forecast of 49.3. This contraction in the data released Friday underscores continuing challenges in the manufacturing sector, marked by a downturn in new orders and a reduction in production.
Conversely, the S&P Global Services PMI Flash for December painted a more optimistic picture. The index rose to 51.3, up from November's 50.8 and surpassing the anticipated consensus of 50.6. This indicates a faster expansion in the service sector, contributing significantly to the economy's overall performance.
The combined impact of these trends is reflected in the S&P Global Composite PMI Flash, which came in at 51.0 for December, marginally up from 50.7 in the previous month.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said the U.S. economy gained some momentum in December, marking the fastest growth since mid-2023.
This growth, primarily driven by looser financial conditions, has positively impacted demand, business activity and employment in the service sector. Yet the manufacturing sector continues to struggle, with declining order books leading to reduced production and employment.
Williamson also highlighted the mixed inflation signals from the survey. While the selling price gauge remains high, suggesting modestly elevated consumer price inflation, service sector input cost inflation remains significantly high, though it has eased compared to the mid-2020 rates.
Stocks showed mixed performance Friday morning, with the SPDR S&P 500 ETF Trust (NYSE: SPY) falling 0.6%, and the Invesco QQQ Trust (NASDAQ: QQQ) up 0.4%.