Prices for services surge in December due to companies' concerns about tariffs.

• The ISM services index for Tuesday was 54.1%, a 2% increase from November and higher than the Dow Jones consensus forecast of 53.4%.
• The prices index surpassed 60% for the first time since January 2024, rising by 6.2 points or over 10%.
• Following the release, yields at the longer end of the curve increased.

In December, the activity in the U.S. services industry increased, but this was accompanied by a sharp rise in expectations for price increases. Businesses became concerned about the impact of tariffs on inflation.

The Institute for Supply Management's services index on Tuesday recorded a reading of 54.1%, indicating the percentage of businesses anticipating growth. This was a 2-point increase from November and surpassed the Dow Jones survey of economists' consensus forecast of 53.4%.

The prices index surged to 64.4%, marking a 6.2-point increase and a more than 10% rise from its previous level. This was the first time the index had exceeded 60% since January 2024, according to Steve Miller, chair of ISM's Business Survey Committee. The index reached its highest level since February 2023.

Across many industries, there was a sense of optimism, but tariff concerns were the most frequently mentioned by panelists, according to Miller.

Trump has denied a report that he was considering a more targeted approach to enacting tariffs after taking office.

The ISM manufacturing survey for the month showed an increase in prices, with the index rising to 52.5%, up 2.2 points from the previous month.

The yields on long-term Treasury bonds increased after the release, with the 10-year benchmark note rising from 4.68% to 4.745%, or 6.5 basis points, on the session.

While noting a generally positive business climate, multiple respondents in the services survey cited tariffs as a concern in 2024.

There is a lot of uncertainty about tariffs and purchasing decisions in the transportation and warehousing industry, as one respondent stated.

The information services industry manager expressed optimism that the new administration would positively impact regulatory, tax, and energy policies to stimulate economic growth. However, they expressed concern about tariff activity and hoped for the best.

The business activity index increased by 4.5 points to reach 58.2%.

The ISM manufacturing survey showed a decline of 2.8 points to 45.3%, with employment remaining little changed at 51.4%. Any reading below 50% indicates contraction.

The Federal Reserve must closely monitor inflation and employment trends to determine its next move in monetary policy. Although the central bank reduced its benchmark borrowing rate by one percentage point from September to December in 2024, it is now expected to proceed with greater caution as it analyzes incoming economic information.

In November, the number of job openings increased, while the number of workers who left their jobs decreased, according to a report released on Tuesday.

The Labor Department's survey revealed that the number of available job openings increased by 259,000 to 8.1 million, exceeding the 7.7 million estimate from Dow Jones. Meanwhile, the number of quits decreased by 218,000 to 3.06 million.

The level of job openings to available workers held around 1.1 to 1.