Economy

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The ISM services index Tuesday posted a reading of 54.1%, up 2 percentage points from November and above the Dow Jones consensus forecast of 53.4%.
Along with the better overall reading, the prices index jumped to 64.4%, an increase of 6.2 points or more than 10%. It was the first time the index had eclipsed 60% since January of 2024.
Treasury yields, particularly at the longer end of the curve, moved higher after the release.

A person shops at a Whole Foods Market grocery store on December 17, 2024 in New York City. 
Spencer Platt | Getty Images

Activity in the U.S. services industry accelerated in December but brought with it a sharp rise in expectations for price increases as businesses grew concerned about the impact tariffs would have on inflation.
The Institute for Supply Management’s services index Tuesday posted a reading of 54.1%, representing the share of businesses expecting growth. That was up 2 percentage points from November and better than the Dow Jones survey of economists showing a consensus forecast of 53.4%.

Along with the better overall reading, the prices index jumped to 64.4%, an increase of 6.2 points or more than 10%. It was the first time the index had eclipsed 60% since January 2024, said Steve Miller, chair of ISM’s Business Survey Committee. The prices index hit its highest level since February 2023.
“There was general optimism expressed across many industries, but tariff concerns elicited the most panelist comments,” Miller said.
President-elect Donald Trump has vowed to enact sweeping tariffs after he takes office later this month. Trump on Monday denied a Washington Post report that he was considering a narrower, more targeted approach.
The ISM manufacturing survey for the month also reflected higher prices, with the index rising to 52.5%, up 2.2 points on the month.
Treasury yields, particularly at the longer-dated end of the curve, moved higher following the release. The benchmark 10-year note most recently yielded 4.68%, up 0.065 percentage point, or 6.5 basis points, on the session.

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10-year yield

In the services survey, multiple respondents cited tariffs as a concern while noting a generally positive business climate wrapping up 2024.
“Seems to be a lot of uncertainty about tariffs and purchasing decisions. A lot of wait and see,” said one respondent in the transportation and warehousing industry.
“Generally optimistic that the incoming administration will positively affect regulatory, tax and energy policies that will spur economic improvement. We are concerned about tariff activity and are hoping for the best,” an information services industry manager reported.
The business activity index also moved higher, rising to 58.2%, an increase of 4.5 points.
Employment was little changed at 51.4%; in the ISM manufacturing survey, the index fell to 45.3%, a decline of 2.8 points. Any reading in the ISM surveys below 50% represents contraction.
Readings on inflation and employment conditions are critical for the Federal Reserve as it contemplates future moves in monetary policy. The central bank lowered its benchmark borrowing rate by a full percentage point from September through December in 2024 but is expected to move at a more cautious pace now as it evaluates incoming economic data.
A separate report Tuesday indicated that job openings nudged higher in November while fewer workers left their jobs.
The Labor Department’s Job Openings and Labor Turnover Survey showed available positions rising to 8.1 million, an increase of 259,000 for the month and higher than the 7.7 million estimate from Dow Jones. At the same time, quits fell to 3.06 million, a decline of 218,000.
The level of job openings to available workers held around 1.1 to 1.

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Officials said the new regulation, adopted despite objections from the banking and consumer data industries, would remove $49 billion in medical bills from the credit reports of about 15 million Americans.The announcement from the U.S. Consumer Financial Protection Bureau came despite demands from Congressional Republicans that Biden’s financial regulators stop issuing new rules as President-elect Donald Trump prepares to take office on Jan. 20, running the risk that Trump or conservative lawmakers may seek to reverse it.In a statement, Vice President Kamala Harris, who championed the initial policy proposal in June, said the move would be “life-changing for millions of families.””No one should be denied economic opportunity because they got sick or experienced a medical emergency,” Harris said.According to the CFPB, medical debt provides little indication of whether a borrower is likely to repay a loan and the change should result in an additional 22,000 low-cost mortgages per year and rising credit scores.The new rule will also prohibit lenders from considering medical information in making lending decisions and help prevent debt collectors from seeking to coerce consumers into paying erroneous medical debts they do not actually owe, the agency said in a statement.The change was endorsed by the American Medical (TASE:PMCN) Association.Trade groups representing banks and credit bureaus said the evidence did not support the CFPB’s decision, and the ban could leave them blind to important information about the risk financial institutions face from borrowers.The American Bankers Association said that could mean banks offer fewer loans. More

Energy prices, which often influence inflation rates, contributed significantly to the rise. However, this impact is not expected to concern the European Central Bank (ECB). Service prices showed a stronger increase than anticipated at 4.0% year-over-year, while goods prices increased by 0.5%, slightly below expectations.At the country level, Germany reported a higher-than-expected inflation rate of 2.9% year-over-year. This was primarily due to a rise in core inflation, although changes in the calculation method for the Consumer Price Index (CPI) in December make it challenging to discern clear trends. In contrast, the inflation data from Italy and the Netherlands did not meet expectations, balancing the overall inflation figures for the euro area. Deutsche Bank (ETR:DBKGn) analysts commented on the inflation data, indicating that the ECB’s approach to policy-making focuses on broader economic trends rather than individual data points. They noted that while the annual rate of services inflation has remained close to 4%, there has been a slowdown in the momentum of service price increases. Domestic inflation is still high but is beginning to decelerate, and wage growth is also moderating.Deutsche Bank maintains a positive outlook, anticipating that the slowing pace of service inflation will contribute to a return to lower overall inflation rates. They expect HICP inflation to drop below the ECB’s 2% target starting from February. If these projections hold, the ECB could potentially adopt sub-neutral policy rates in 2025. Today’s inflation figures, which did not show any significant negative surprises, support the prediction that a cautious easing of policy during the ECB’s January meeting remains the most likely course of action, the economists concluded.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

He added that gross debt issuance would reach 278 billion euros, versus the 257 billion euros issued last year, which was equivalent to 17% of the country’s gross domestic product. Cuerpo told a news conference that the government was giving itself “enough flexibility to respond to the reconstruction needs” following devastating floods in southeastern Spain that killed 224 in October.In terms of debt-to-GDP ratio, Madrid expects it to stand at 101.4% by the end of 2025, down from 102.5% at end-2024. Spain’s GDP “kept pace” in the fourth quarter of 2024, Cuerpo added, outpacing other large economies in the European Union. The government estimates GDP growth for the whole of 2024 was 2.7%. It expects the economy to grow by 2.5% this year. ($1 = 0.9606 euros) More

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China is strongly dissatisfied with and firmly opposes the U.S. investigating its drone systems and said it will closely monitor the situation.China also urged the U.S. to respect facts and immediately stop what it called “erroneous practices”.The U.S. Commerce Department said on Thursday it was considering new rules that would impose restrictions on Chinese drones to restrict or ban them in the United States, citing national security concerns. More