WASHINGTON, Jan 6 (Reuters) – U.S. services industry activity slowed more than expected in December, likely restrained by a resurgence in COVID-19 infections, but supply bottlenecks appear to be easing.
The Institute for Supply Management said on Thursday its non-manufacturing activity index fell to 62.0 last month from 69.1 in November, which was the highest reading since the series started in 1997.
A reading above 50 indicates growth in the services sector, which accounts for more than two-thirds of U.S. economic activity. Economists polled by Reuters had forecast the index falling to 66.9.
The United States has been slammed by a winter wave of coronavirus cases, fanned by the Omicron variant. Airline travel has been severely disrupted. Though businesses have not been shut down, services have been reduced as workers call in sick or need to isolate.
The ISM’s measure of new orders received by services businesses dropped to a reading of 61.5, the lowest in 10 months, from a record 69.7 in November.
With inventory sentiment still subdued, a rebound is likely once the current wave of coronavirus infections subsides.
Soaring cases also likely slowed hiring at services industries last month. The survey’s measure of services industry employment fell to a reading of 54.9 from a seven-month high of 56.5 in November.
But there are some tentative signs that the supply logjam in the services industry is starting to break up. The survey’s measure of supplier deliveries fell to 63.9 from 75.7 in November. A reading above 50% indicates slower deliveries.
The improvement mirrors the findings of the ISM’s manufacturing survey published on Tuesday. Most manufacturers expressed optimism that the worst of supply constraints, which have boosted inflation, was likely behind.
Even as supply is getting better, services businesses continue to pay higher prices for inputs. The ISM’s measure of prices paid by services industries was little changed at 82.5 in December. (Reporting By Lucia Mutikani Editing by Chizu Nomiyama)