Services Sector Shows Slowing Contraction In December

January 6, 2009 2:08 p.m. EST

New York, NY (AHN) - The Institute for Supply Management (ISM) said Tuesday its service sector index rose 3.3 percent to 40.6 in December, well ahead of market expectations.

The December increase shows the services sector contracted at a slower pace compared to November, when the index was 37.3. However, the reading is still below 50, which is considered the breakpoint between contraction and expansion.

The result was well ahead of economists forecast as expectations were for a small drop in December to 37.

Last week the ISM reported 28-year lows in its manufacturing index while the services index had declined three consecutive months before the December increase.

Of the 18 service sectors that are tracked in the index, only the retail trade sector reported growth in December.

The ISM business activity index showed a 6.6 percent jump to 39.6 percent in December.

Retail trade was again the lone sector reporting increased activity; however, many sectors said activity was unchanged for the month.

The ISM's service sector index is based on a survey of members in 18 sectors including real estate, retail, hospitality and wholesale trade.