The S&P Global US Composite Purchasing Managers' Index final reading came in at 52.7 in December compared to 54.2 in November, and 54.6 in October, as the activity growth rate slowed to the weakest since April, dampened by the smallest rise in new business inflows for over a year and a half.

The US Services PMI Business Activity Index recorded 52.5 in December, down from 54.1 in November, and below expectations of 52.9 in the Econoday survey of forecasters.

Demand conditions cooled somewhat in December, with growth of new work faltering. Overall, inflows of new business rose only marginally and to the weakest degree in 20 months, the report said.

Confidence in the outlook also weakened, whilst employment volumes stagnated, failing to rise for the first time since last February, it added.

Respondents blamed concerns over costs, as well as budget limitations and weak demand growth for the lackluster trend in employment.

Tariffs also continue to be a source of instability, especially in relation to foreign demand. New export business declined in December for a second time in the past three months, with the rate of contraction the steepest since last May.

The squeeze on company budget continued, with input price inflation ramping up in December to a seven-month high, staying well above its historical trend level. Service providers continued to report that costs were being driven higher by tariffs, and a general increase in supplier charges, it said, adding [l]abor related expenses were also reported to be a source of cost inflation.

The composite is expected unrevised from the flash at 53.0 for December, down from 54.2 in November. The consensus sees the services index unrevised from 52.9 for December, down from 54.1 in November. Both suggest resilience and ongoing moderate expansion in business activity.

US Services Purchasing Managers' Index (PMI) is based on monthly questionnaire surveys collected from over 400 U.S. companies which provide a leading indication of what is happening in the private sector services economy. It is seasonally adjusted and is calculated from seven components, including New Business, Employment and Business Expectations.

Investors need to keep their fingers on the pulse of the economy because it indicates how various types of investments will perform. The Markit Services PMI provides advance insight into the services sector, which gives investors a better understanding of business conditions and valuable information about the economic backdrop of various markets. The stock market likes to see healthy economic growth which generally translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures. The PMI data are also used by many Central Banks to help make interest rate decisions.

The IHS Markit Services Flash data give a detailed look at the services sector, the pace of growth and the direction of this sector. Since the service sector accounts for more than three-quarters of U.S. GDP, this report has a significant influence on the markets. In addition, its sub-indexes provide a picture of new business, employment, business expectations and prices.