Markit Economics released its preliminary services purchasing managers' index (PMI) for the U.S. on Friday. The U.S. preliminary services purchasing managers' index (PMI) dropped to 53.7 in December from 56.1 in November. It was the lowest level since December 2014.

Analysts had expected the index to fell to 56.0.

A reading above 50 indicates expansion in economic activity.

The drop was driven by a sharp slowdown in new business growth.

"A lack of inflationary pressures, slowing growth and a drop in business confidence to a five-year low are all disappointing news for an economy which has seen the first US interest rate hike for almost a decade," Markit Chief Economist Chris Williamson said.

He added that the data was consistent with an annual 1.8% growth in the fourth quarter.