The U.S. private sector expanded at a slower pace in December as weaker services growth eclipsed the stronger performance by manufacturers, IHS Markit reported.
The seasonally adjusted IHS Markit flash U.S. composite output index fell to 53.0 for the month from 54.5 in November, indicating the weakest expansion of private-sector business activity since March.
While manufacturing production expanded at the fastest pace since January, output growth in the service sector eased to its lowest level since September 2016. The IHS Markit flash U.S. manufacturing purchasing managers', or PMI, index rose to 55.0 in December from 53.9 in November and the flash U.S. services business activity index dropped to 52.4 from 54.5.
"With services representing a far greater portion of the economy than manufacturing, the overall picture is therefore one of the manufacturing sector's exuberance being overshadowed by the gloomier service sector," said Chris Williamson, chief business economist at IHS Markit.
Weaker new business growth was seen across the private sector in December, according to IHS Markit. However, companies increased their operating capacity due to resilient client demand and a modest rise in backlogs of work.
Business optimism in the manufacturing sector increased to its strongest level since January 2016, while sentiment in services slipped to its weakest since June 2016, IHS Markit said.
"Measured overall, the surveys point to the economy growing at a modest annualized rate of just over 2% in the fourth quarter," Williamson said.