Services Sector Expands for Third Consecutive Month to End 2025 on High Note, ISM Says

02:53 PM EST, 01/07/2026 (MT Newswires) -- The US services sector expanded for a third straight month in December, reaching its highest reading of 2025, aided by strength in demand and a rebound in employment, the Institute for Supply Management said Wednesday.

The ISM's purchasing managers' index rose to 54.4 last month from 52.6 in November. The consensus was for a 52.2 print in a survey compiled by Bloomberg. A reading above 50 indicates the services sector economy is generally expanding.

The new orders index jumped to 57.9 from 52.9 sequentially, marking its highest level since September 2024, while the gauge for employment increased to 52 from 48.9, its first expansion since May 2025, the report showed.

"Overall, this report suggests that demand conditions are in decent shape in the service sector," Vikram Rai, senior economist at TD Economics, said in a note. The rebound in employment is "only a soft signal and not one that will receive much weight," given that the official US jobs report for December due Friday will give a clearer picture of the recent trend in the labor market, Rai said.

The Bureau of Labor Statistics is expected to report Friday that the world's largest economy added 70,000 nonfarm jobs last month, compared with a 64,000 gain reported for November, according to a Bloomberg-compiled survey.

The business activity index rose to 56 in December from 54.5 the previous month, while the measure for prices fell to 64.3 from 65.4, the ISM report showed Wednesday.

"Respondents in several industries report higher prices and input costs, and some also report still feeling some drag from the (recently ended federal) government shutdown," Rai said. "Uncertainty about trade policy and its impact on inflation remains a going concern for businesses in the service sector."

On Tuesday, S&P Global (SPGI) said the US services sector grew last month at the slowest pace since April amid weak business inflows and employment volumes, while the outlook deteriorated.

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