US: ISM-S index falls more than expected

In the US, ISM service dropped from 69.1 in November to 62 in December. This was lower than the expected 66.9 and was the lowest reading since January 2021.

In the US, ISM service dropped from 69.1 in November to 62 in December. This was lower than the expected 66.9 and was the lowest reading since January 2021. It can be read positively on the net as the partial easing in the supply chain is reflected in the shipping times and the activity is still going on at a significantly faster pace. Alleviating supply constraints in G4 economies is important for the status of inflation.

 

In terms of sub-indexes; business activity fell from 74.6 to 67.6. While the prices paid increased from 82.3 to 82.5; new orders fell from 69.7 to 61.5, the lowest level since February 2021. Employment fell from 56.5 to 54.9. Backlog orders fell from 65.9 to 62.3 and deliveries fell from 75.7 to 63.9, which is related to supply chain easing. We'll see if it persists. There is no relief from the scorching hot region in the price index yet. We see stricter pricing in the service sector than in the manufacturing sector. Closing concerns due to Omicron seem to be reflected in price rigidity. It's not just the challenges of securing entries, shipping delays impact delivery times and persistent price pressures are shrinking margins. While activity has been marred by concerns about the COVID-19 Omicron variant, arguments suggesting that the Omicron outbreak is causing less severe illness are providing some economic relief. Case growth in Western economies was renewed towards the closing months of 2021, and we are still experiencing the concern on a regional basis. The US, on the other hand, is still in better shape than Western Europe.

 

The important issue for the Fed is the course of inflation. Therefore, what the wage data to be announced tomorrow will tell will be important. The absence of any improvement in the prices component increases the inflationary pressures felt throughout the economy. Consumer price increases were more concentrated in goods last year, while higher prices have more recently begun to penetrate the services sector. Inflationary pressure spiral concerns still persist.

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