LIVE MARKETS-Monday data: Services save the day

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MONDAY DATA: SERVICES SAVE THE DAY

Two bits of data greeted investors on the first Monday of 2025, both of which reiterated the notion that the U.S. economy is, in general, on firm footing.

But manufacturing, specifically, is not.

U.S. business activity expanded at a slightly decelerated pace last month.

S&P Global's final take on its non-manufacturing purchasing managers' index (PMI) USMPSF=ECI shed 1.7 points to settle at 56.8, remaining comfortably to the north of 50, the dividing line between monthly expansion and contraction.

So the services sector is growing, what else is new.

Combined with S&P Global's manufacturing PMI, which came in at a slightly contractive 49.4 last Thursday, the composite reading landed at 55.4.

"The improved performance of the service sector has more than offset a continued drag on the economy from the manufacturing sector, meaning the survey data point to another robust expansion of the economy in the fourth quarter," writes Chris Williamson, chief business economist at S&P Global. "But with growth as strong as this, it’s understandable that policymakers are taking a more cautious approach to lowering interest rates," in the near term.

As if to punctuate the manufacturing sector's weakness, a separate report showed new orders for U.S. factory-made goods USFORD=ECI declined by 0.4% in November, steeper than the 0.3% dip analysts expected.

Cold comfort can be drawn from the fact that this weaker-than-expected number follows an upwardly-revised October figure, bumped up to an 0.5% increase from the previously-stated 0.2%.

Even so, U.S. factory orders have been essentially moving sideways for about two-and-a-half years, which explains why S&P Global and ISM manufacturing PMIs are having such a difficult time breaking through the 50 barrier.

The Commerce Department's report also showed new orders for core capital goods - which strips away aircraft and defense items, and is considered a barometer of U.S. corporate capex intentions - was revised lower, to 0.4% from 0.7%.

All of this makes for a fairly quiet start to a week back-end loaded with closely-watched data, culminating on Friday with the Labor Department's December payrolls report, delayed on account of the New Year holiday.

Economists are predicting the U.S. economy added 154,000 jobs in the final months of 2024, with the jobless rate hanging steady at 4.2%.

(Stephen Culp)

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