The ISM Services Index, which measures economic activity in the services sector, has now joined its manufacturing brethren in moving below 50 into contraction territory. The index fell to 49.6% in December from 56.5% in November, marking the first reading below 50 since December 2009 (other than the start of the pandemic in the spring of 2020). Among the components of the index, new orders dropped sharply to 45.2%, employment fell into contraction at 49.8% and supplier deliveries eased again to 48.5%.

What’s the bottom line? Survey respondents (which include purchasing and supply executives from non-manufacturing firms) spoke to the challenges they’re facing, with one noting that, “Orders from customers are softening, and some orders are being canceled.” Another explained, “Our company has tightened hiring of new employees month over month, due to uncertainty around the strength of the economy going into 2023.” All in all, the U.S. economy continues to weaken, and this is now spreading into the services sector.