(Jan 7): Growth at US service providers quickened in December, reflecting stronger business activity that helped push a price measure to the highest since early 2023.

The Institute for Supply Management’s (ISM) index of services advanced two points to 54.1 last month, the group said on Tuesday. Readings above 50 indicate expansion. The measure of prices paid for materials and services rose more than six points to 64.4.

The acceleration in the cost gauge comes as Federal Reserve policymakers adopt a more cautious approach to lowering interest rates. Resilient demand, illustrated by the pickup in business activity and stronger orders, adds to concerns that inflation will remain stubborn.

The group's new orders gauge rose 0.5 of a point to 54.2, in line with the 2024 average. Combined with a three-month high in the measure of business activity, which jumped 4.5 points, the data suggest the economy remained on solid footing at the end of the fourth quarter.

Meantime, the ISM gauge of service employment was little changed at 51.4, suggesting companies are comfortable they can meet demand with existing staffing levels.

The pickup in service sector growth stands in contrast to sluggish manufacturing. Last week, ISM's factory gauge showed activity contracted in December for a ninth consecutive month.

Producers remain challenged by a strong dollar, potential tariffs and general uncertainty from dockworkers’ contract negotiations that are set to resume on Tuesday.

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