The ISM Services PMI rose to 54.4 percent in December from 52.6 percent in November, marking its highest reading of 2025 and a third consecutive month of expansion. Readings above 50 indicate growth in the sector, which accounts for roughly two-thirds of U.S. economic activity.
The ISM said the pickup reflected broad-based gains across key components of the index, including production, new orders, and employment, suggesting momentum improved late in the year after a softer stretch through the summer and early fall.
The survey’s business activity index climbed to 56 percent, its strongest reading since December 2024, while the new orders index surged to 57.9 percent, the highest level since September 2024. The employment index returned to expansion territory at 52 percent, its first expansionary reading in seven months, pointing to renewed hiring after months of caution among service providers.
“Eleven industries reported growth in December, one fewer than in November, while the number reporting contraction remained at five,” said Steve Miller, chair of ISM’s services business survey committee.
Industries recording growth in December include retail trade, finance and insurance, and transportation and warehousing. Those reporting contraction include professional and technical services, as well as construction.
Price pressures, while still elevated, showed signs of easing. ISM’s prices index slipped to 64.3 percent from 65.4 percent in November, its lowest level since March. The price index has remained above 60 for more than a year, a level that signals persistent inflation pressures in the service economy.
Upbeat ISM Data Contrast With Softer Demand Signals Elsewhere
Data released on Jan. 6 from S&P Global showed that while U.S. service-sector activity continued to expand in December, the pace of growth slowed to an eight-month low, as demand softened and businesses grew more guarded about the outlook heading into 2026.“Business activity continued to expand in December, rounding off another quarter of robust growth, but the resilience of the U.S. economy is showing signs of cracking,” Chris Williamson, chief business economist at S&P Global, said in a statement.
S&P Global’s services business activity index eased to 52.5 in December from 54.1 in November. New business inflows rose at their weakest pace in over a year, per the report, which cited tighter client budgets, policy uncertainty, and pressure from tariffs.
“New business placed at services providers showed the smallest rise in some 20 months, which, accompanied by the first fall in orders placed at manufacturers for a year, points to a broad-based weakening of demand growth,” Williamson said.
Employment stagnated in December, the report said, noting that more businesses were cutting staff than adding workers for the first time since early 2025.
Taken together, the ISM and S&P Global reports suggest the U.S. service sector finished 2025 on a stronger footing, even as signs emerged that growth may become harder to sustain in early 2026 amid softer demand and persistent cost pressures.
The unemployment rate, though still low by historical standards, rose steadily over the year, increasing from 4 percent in January 2025 to 4.6 percent by November.
