US DATA
The Dallas Fed's monthly Texas Service Sector survey showed the diffusion index for general business activity remained fairly steady at 9.6 in December, vs 9.8 in November.
- That figure was bolstered by stronger revenue and company outlook readings and lower outlook uncertainty, however employment/hours worked and capex weakened even as input and selling prices increased.
- Looking ahead, per the report, "Other future service sector activity indexes such as employment and capital expenditures remained in positive territory, reflecting expectations for sustained growth in the next six months.". Indeed the 6-month ahead reading hovered around November's 36-month high, possibly a byproduct of post-election business optimism but also in line with the broader trend of improvement since mid-2022. For what it's worth, the anecdotal commentary in the Services survey pointed to concerns over shifts in tariff and immigration policy negatively impacting their business/sector/the broader economy.
- The regional Fed services surveys have each shown softer activity vs November, with the Philly Fed's declining 0.1 point to -6.0, and the NY Fed's dropping 4.7 points to -5.2. The month-to-month Fed regional readings don't translate cleanly into the broader national ISM non-manufacturing reading, though the pullback in November to 52.1 (56.0 prior) looks better-supported by the regional evidence than does the S&P Global Services PMI's December flash reading showing an improvement to a multi-year high 58.5 (56.1).
- Overall, though, services appear to me moving in a firming rather than a deteriorating direction. The regional surveys do broadly affirm a continued divergence between manufacturing steady at a slow pace, and services showing some improvement.
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