US business activity continued to expand in December, according to early 'flash' PMI data. However, the rate of growth dropped to the weakest since June, accompanied by the smallest rise in new business inflows for 20 months.

Demand for services grew only modestly, rising at a sharply reduced rate, and new orders for goods fell for the first time in a year.

The survey also saw a slight pull-back in business confidence for the year ahead, which contributed to a softening of employment growth to only a marginal level.

Price pressures meanwhile intensified noticeably, with average selling prices rising at one of the steepest rates since mid-2022. Firms reported passing on the sharpest rise in costs for just over three years, in turn widely blamed on tariffs.

The headline S&P Global US PMI Composite Output Index fell to 53.0 in December from 54.2 in November, according to the 'flash' reading (based on about 85% of usual survey responses). The latest reading was the lowest since June, though continues to indicate robust economic growth. Output has now risen continually for 35 months.

Similar increases in output were recorded across both manufacturing and service sectors in December, although rates of expansion slowed to three- and six- month lows respectively as demand conditions cooled. Manufacturing new orders fell, albeit only modestly, for the first time in a year, while growth of new business in the service sector slipped to a 20-month low. Measured overall, new order inflows consequently rose only modestly in December and to the smallest degree since orders fell slightly back in April 2024.

Employment growth also softened in December, falling to a marginal level that was the lowest since September.

Companies' expectations about output in the year ahead remained positive on balance and above some of the lows seen this year but deteriorated slightly to fall further below the survey's long-run average.

At 51.8, down from 52.2 in November, the S&P Global US Manufacturing PMI signalled an improvement in factory business conditions for the fifth successive month in December, albeit to the weakest degree over this period.

Production growth dipped to a three-month low as new orders fell for the first time since December 2024. Input inventories also grew at a slower pace. Supporting the PMI was the fastest increase in employment since August, as well as a lengthening of suppliers' delivery times to the greatest extent since September.

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