Preliminary data released by IHS Markit on Monday pointed to a slightly stronger expansion in business activity in December as service sector growth accelerated to a five-month high, while manufacturing conditions continued to improve, albeit at a slightly slower pace than in November.

According to the report, the Markit flash manufacturing purchasing manager's index (PMI) came in at 52.6 in December, slightly down from 52.6 in November. Economists had expected the reading to stay at 52.6. A reading above 50 signals an expansion in activity, while a reading below this level signals a contraction. According to the report, the increase in the headline PMI was by further expansions in output and new orders, with the upturn in the latter remaining solid overall. Although rates of increase eased in each case,

growth remained more robust than those seen earlier in the year.

Meanwhile, the Markit flash services purchasing manager's index (PMI) jumped to 52.2 this month, from 51.6 in the prior month. The latest reading was the highest one since July. Economists had expected the reading to increase to 52.0. The companies recorded the fastest rate of new order growth for five months as well as a renewed rise in export orders at the end of 2019, following four consecutive monthly declines.

Overall, IHS Markit Flash U.S. Composite PMI Output Index came in at 52.2 in December, up from 52.0 in November, signaling the sharpest rise in private sector output since July.

Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at HIS Markit, noted: “December’s expansion was led by an improved performance of the vast services sector, accompanied by another month of steady manufacturing growth. Encouragingly, expectations for business activity in the year ahead lifted higher in both sectors to reach the highest since June to suggest the expansion will continue to gain momentum as we head into the New Year. Optimism reflected reduced fears over trade wars and more favorable financial conditions.”