U.S. ISM non-manufacturing index remains unchanged in December, economy enters 2017 on strong footing

The U.S. Institute for Supply Management’s (ISM) non-manufacturing index stayed the same in December at 57.2. The headline figure surprised to the upside with markets estimating a slight drop to 56.8. Along with the rebound in the manufacturing index, the ISM composite rose to 56.9, the highest level in over one year.

New orders were amongst the sub-components that witnessed the greatest rebound. It rose 4.6 points to 61.6, which is an eight month high. Prices paid were also up by 0.7 points to 57. Meanwhile, business activity dropped in the month by 0.3 points to a still strong 61.4, noted TD Economics in a research report. Employment also saw a sharp reversal as import and export indicators both dropped to 53 and 50 respectively. The backlog of orders also dropped 3 points to 48 in the month.

In all, comments from contacts were greatly positive, with two-thirds of the 18 non-manufacturing industries surveyed reporting growth in December. Three components have registered unchanged activity, with public administration, agriculture and wholesale trade the only ones to report declines in activity.

The headline print stayed at the highest level in over one year with optimistic comments from industry participants. Along with its manufacturing cousin, the report implies that the U.S. economy entered 2017 on a strong footing in spite of increased political uncertainty and rising interest rates, stated TD Economics.

The higher rise in the new orders sub-index was especially encouraging and shows that businesses are becoming greatly optimistic as far as their demand prospects. Meanwhile, their costs of doing businesses are increasing, with the prices paid sub-index rising to the highest level in over two years, providing additional comfort to the Fed that inflation would track towards its 2 percent target, and reassuring the FOMC to continue on its tightening path, said TD Economics.

At 04:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was bearish at -86.9449. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex