The US economy ended 2024 on a strong note, propelled by robust activity in the services sector. December PMI Services index surged from 56.1 to 58.5, a 38-month high, highlighting the sector’s vital role in driving growth. This expansion lifted PMI Composite from 54.9 to 55.6, its highest level in 33 months, despite a continued contraction in the manufacturing sector, where PMI fell from 49.7 to 48.3.
According to Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, “business is booming” in the services economy, which is experiencing its fastest growth since the post-COVID reopening in 2021. This momentum is consistent with GDP growing at an annualized rate of just over 3% in December.
Additionally, confidence in the 12-month outlook has reached a two-and-a-half-year high, suggesting that the current economic upturn could “persist into the new year” and broaden across more sectors.
However, challenges remain for the manufacturing sector, where optimism has been dampened by concerns over tariffs and their potential to increase costs.
December also saw sharp spikes in raw material prices, driven by supplier-led increases and higher shipping costs, reflecting busier supply chains ahead of anticipated protectionist measures in the new year. These inflationary pressures could present risks to the broader economy, even as services continue to underpin overall growth.
