In December 2024, the U.S. services sector experienced heightened activity, as indicated by the Institute for Supply Management’s services index, which rose to 54.1%, surpassing expectations. However, this growth was accompanied by rising inflation fears, with the prices index climbing to 64.4%, its highest since February 2023. Concerns about potential tariffs under the incoming Trump administration contributed to this inflationary pressure. Business sentiment remained generally optimistic, with many sectors expressing hope for favorable regulatory and economic policies, despite worries about tariffs impacting purchasing decisions.
The ISM’s manufacturing survey also indicated price increases, with its index reaching 52.5%. Consequently, Treasury yields rose, with the benchmark 10-year note reaching 4.68%. Employment in the services sector remained stable at 51.4%, while the manufacturing index indicated contraction at 45.3%. Meanwhile, a separate Labor Department report noted an increase in job openings to 8.1 million, suggesting a tightening labor market, though fewer workers were voluntarily leaving their jobs. The Federal Reserve, which had recently cut rates, is likely to adopt a cautious stance moving forward as it analyzes the evolving economic landscape.
