A closely watched survey on non-manufacturing activity was issued earlier this morning by the Institute for Supply Management, a Tempe, Arizona-based trade group. That survey, covering the key services sector, affirmed that non-manufacturing activity had again stepped up in December, but at a slightly slower rate than in November, and at a pace that was a little below expectations.

In all, such activity came in at 53.0, which was a full three percentage points above the acknowledged dividing line between an expanding non-manufacturing base and one that is contracting.

Still, this result while solid, showed the smallest rate of growth since June, when this survey came in at 52.2. In November, the level of activity had been 53.0. In August, the report had shown a somewhat more formidable expansion rate of 58.6. Since the services sector covers some 70% of aggregate economic activity, such a result is closely watched. The latest data, meanwhile, should not sway economic views for the just-concluded three months appreciably. We still expect GDP growth in the last quarter to be in the range of 2.5%-3.0%, which represents a step-up from our earlier forecast of about 2%, but a lesser rate of improvement than during the third quarter. At that time, growth, embellished by a surge in inventories, which now will need to be worked down, had risen to 4.1%.

Meantime, expectations for the latest month had been 54.5, a slightly higher rate of increase. Among the individual components of this survey, we saw a sharp deceleration in new orders, with this segment falling from 56.4 to 49.4. New orders had been above 60 as recently as August. However, employment ticked up on a consecutive-month basis, going from 52.5 to 55.8. Also, prices perked up, which is encouraging, as deflation remains a modest concern in some quarters.

Among respondents, we heard that business and hiring were both steady in December, although some noted that the harsh early winter was having an impact on business activity in certain categories. Overall, our sense was that business was either steady or improving modestly, which would seem consistent with the economic expansion at large.

On the whole, this was another decent, but clearly not exceptional report, and further suggests, as we noted above, that the fourth quarter's rate of GDP growth may well have been in the range of 2.5%-3.0%--a solid showing. Please note that the current schedule calls GDP results to come out on January 30th.

At the time of this article's writing, the author did not have positions in any of the companies mentioned.