The latest data reveals a slowdown in US business activity, signalling potential challenges for forex traders monitoring the dollar and related markets.
In December, the preliminary Purchasing Managers’ Index (PMI) fell to 52.9 from a prior reading of 54.1. The composite PMI also declined to 52.7, down from the preliminary 53.0 and well below the previous 54.1. Business activity growth slowed to an eight-month low of 52.5, while new business inflows hit a 20-month low. Employment volumes stagnated, ending a nine-month streak of continuous growth.
Input price inflation accelerated to a seven-month high, largely due to tariffs. Consequently, service providers increased selling prices at a faster pace to offset rising costs. However, confidence in the economic outlook weakened amid ongoing uncertainty over tariffs and government policy.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, commented on these trends: “Business activity continued to expand in December, rounding off another quarter of robust growth, but the resilience of the US economy is showing signs of cracking. New business at service providers saw the smallest rise in some 20 months, and for the first time in a year, manufacturers experienced a fall in orders. This points to a broad-based weakening of demand growth.”
He added, “The December surveys signal the weakest economic expansion since last April. The number of companies cutting headcounts has exceeded those reporting higher employment for the first time since February. As we enter 2026, future output expectations are much lower than at the start of 2025, raising concerns that the slowdown and job market malaise observed in December could continue.”
Williamson highlighted that “Confidence has been dampened principally by uncertainty over government policy and the broader economic outlook. Tariffs and affordability concerns are common themes in companies’ cautious views on their prospects.” The impact of tariffs has been felt on both input costs and selling prices, suggesting a possible scenario of slower economic growth coupled with persistent inflation in early 2026.
Despite these challenges, some companies expect that lower interest rates and supportive government policies will help to boost demand as the year progresses.
For forex traders, the key takeaways include the slowing expansion in business activity, weakening employment growth, rising costs due to tariffs, and cautious economic sentiment. These factors may influence dollar strength and market volatility as traders weigh the potential for slower growth alongside persistent inflationary pressures.
Original Source: Adam Button of investinglive.com
