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First Cut: December New York service sector survey shows activity steady, the future looks better

The general business activity index in the New York Fed’s Business Leaders Survey was essentially unchanged at 3.0 in December after 2.9 in November. It is a tepid pace of expansion, but expansion nonetheless and an indication that the service sector is weathering the conditions that have kept manufacturing in a recession for four months in a row. The six-month outlook index rose to 18.0 in December from 12.9 in November. It suggested that sentiment about the future continued to rise.

The index for the business climate improved to -4.5 in December after -10.5 in November. Conditions are still weak, but less so.

Employment picked up the pace to 6.8 in December after 1.2 in November, as did the index for wages at 35.1 after 31.7. Service businesses are hiring and paying more to new workers, as well as hiking wages for existing employees in an effort to retain skilled workers.

The index for prices paid rose to 47.1 in December, reflecting higher costs for more than energy commodities. Prices received remained more-or-less in line with recent months at 15.2 in December after 16.1 in November. Pricing power is not absent, but the ability to pass on higher costs is limited in scope.

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