U.S. services gauge shrinks unexpectedly in worst slide since 2020

A U.S. services gauge unexpectedly shrank at the end of 2022, with steep declines in measures of business activity and orders that, if sustained, risk heightening concerns about the demand outlook.

The Institute for Supply Management’s index of services dropped to 49.6 last month, the lowest since May 2020, from 56.5 in November, data released Friday showed.

The figure was below all projections in a Bloomberg survey of economists. Readings below 50 signal contraction.

The nearly 7-point decline from the prior month was the largest since the immediate aftermath of the pandemic.

It may have been impacted by severe winter weather that threw holiday travel into chaos and caused widespread power outages.

While the storm struck at the end of the month, any sustained weakness in the measures would suggest a lack of forward momentum in the economy.

Six industries contracted in December, led by real estate and wholesale trade, the ISM data showed.

The group’s gauge of business activity, which parallels the ISM’s factory output index, slumped 10 points to 54.7 last month.

The orders measure slid even more. Both declines were the largest since April 2020.