In December 2024, the U.S. services sector experienced a remarkable expansion, with the S&P Global flash services index rising to 58.5 from 56.1, marking the fastest pace of growth since October 2021. This surge reflects a robust demand in the services industry, which plays a crucial role in the overall economy. The composite index for future output also increased significantly, climbing by 3.3 points to 71.1, the highest level since May 2022. Chris Williamson, Chief Business Economist at S&P Global, noted that 'business is booming' in the services sector, indicating strong consumer demand and business activity [5a33b8a6].
However, this positive trend in services starkly contrasts with the struggles faced by the manufacturing sector. The manufacturing PMI fell from 49.7 to 48.3, indicating a contraction in factory output and orders, which have been exacerbated by rising input prices and ongoing tariff concerns. The Empire State manufacturing activity index recorded its largest decline since May 2023, highlighting the challenges manufacturers are currently facing [5a33b8a6].
Despite the difficulties in manufacturing, confidence in the 12-month economic outlook reached a 2.5-year high, suggesting that businesses remain optimistic about future growth. Prices paid by manufacturers for materials rose to 59.1, the highest since late 2022, while service providers' input costs grew at the slowest pace in over four years [5a33b8a6].
As the U.S. economy navigates these divergent trends, the services sector's strong performance stands out against the backdrop of a contracting manufacturing industry. The overall GDP growth rate is projected to exceed 3% in December, showcasing resilience in the U.S. economy despite the challenges faced by manufacturers [5345c2da].
In parallel, China's economic recovery is gaining traction, primarily driven by its manufacturing sector. The official manufacturing purchasing managers' index (PMI) rose to 50.3 from 50.1 in October, marking a seven-month high. However, the non-manufacturing PMI fell to 50 from 50.2, indicating a slowdown in the services sector. Overall business confidence in China reached a seven-month high, suggesting optimism about GDP growth accelerating in the fourth quarter, even as structural and cyclical pressures continue to pose risks [33c2dec5].
As both nations navigate their respective economic landscapes, the interplay of domestic and international pressures will be crucial in shaping the future of their manufacturing and services sectors. The U.S. services sector's strong performance contrasts with the challenges faced by its manufacturing counterpart, while China's manufacturing shows resilience amid a slowing services sector [a456a030][28f18849].