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U.S. Non-Manufacturing Index Drops To Six-Month Low In December

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Activity in the U.S. service sector grew at a notably slower rate in the month of December, according to a report released by the Institute for Supply Management on Tuesday, with the index of activity in the sector falling by more than anticipated.

The ISM said its non-manufacturing index fell to 56.2 in December from 59.3 in November. While a reading above 50 indicates continued growth in the service sector, economists had expected the index to show a more modest drop to 58.0.

With the bigger than expected decrease, the non-manufacturing index fell to its lowest level since hitting 56.0 last June.

However, Paul Dales, Senior U.S. Economist at Capital Economics, said the drop by the index is "nothing to worry about since November's reading was a nine-year high. The ISM surveys are still consistent with annualized GDP growth of 3.0%."

The pullback by the headline index came as the business activity index tumbled to 57.2 in December from 64.4 in November.

The new orders index also dipped to 58.9 in December from 61.4 in November, while the employment index edged down to 56.0 from 56.7.

On the inflation front, the prices index dropped to 49.5 in December from 54.4 in the previous month, indicating the first drop in prices in 62 months.

Anthony Nieves, chair of the ISM Non-Manufacturing Business Survey Committee, said, "According to the NMI, 12 non-manufacturing industries reported growth in December."

"Comments from respondents are mostly positive about business conditions and the overall economy for year-end," he added.

Last Friday, the ISM released a separate report showing that its index of activity in the manufacturing sector fell more than expected in December.

The ISM said its purchasing managers index fell to 55.5 in December from 58.7 in November, while economists had expected the index to drop to 57.5.

With the bigger than expected decrease, the manufacturing index fell to its lowest level since hitting 55.3 in June.

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