U.S. ISM non-manufacturing index falls in December

The U.S. ISM non-manufacturing index dropped in the month of December, undershooting consensus expectations. The index dropped 3.1 points to 57.6 in the month, as compared with the expectations of a fall to 58.5. The details of report also come on a weak side. Apart from new orders, which rose 0.2 points to 62.7, the remaining four of the index’s five subcomponents that make up the headline number fell on the month.

Business activity subcomponent dropped from its cyclical high level, falling by 5.3 points to 59.9. In the meantime, the employment subcomponent fell for the third straight month. Supplier deliveries fell five points to 51.5, implying faster deliveries. Prices pressures also moderated significantly, with the prices paid subcomponent declining by 6.7 points to 57.6. Computers and peripherals, gas and oil products, lumber products, and steel products were seen to be among commodities where prices dropped on the month.

Trade-related components saw slight rebound, with export orders rising and import orders growth slowing. Comments from business owners imply that they remained upbeat on their year-end performance, but the outlook for 2019 is marked by concerns, including trade, higher interest rates, labor shortages, and higher material prices.

“After staying above 60-points for three consecutive months – the best three-month streak since its inception – some payback was expected. Overall, the index remains at a high level, but the decline underscores that the high-water mark in economic growth may be behind us”, noted TD Economics in a research market.

Declining oil prices, a temporary true in a trade dispute with China, and a renegotiated NAFTA agreement with Canada and Mexico also gave some reprieve from rising input prices that have been squeezing profit margins. Meanwhile, comments from business imply that they are hoping for the best, but are preparing for further price rises in 2019, said TD Economics.

“While last week's payroll report delivered an impressive headline, the slowdown in the employment subcomponent suggests that this may be the last hurrah before supply constraints begin to weigh on job creation”, added TD Economics.

At 18:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was bearish at -99.6297. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex